Last November, in his role as president of the New York Federal Reserve, Tim Geithner personally interceded in negotiations between AIG and banks like Goldman Sachs, Société Générale, and Deutsche Bank, and arranged for said banks to receive in-full payment on the credit default swaps they had purchased rather than the 40 cents on the dollar the struggling insurance company was proposing. Per Bloomberg:
The New York Fed's decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III.
According to a quarterly New York Fed report released in June, that $29.6 billion has now shrunk by about $7 billion. So, wow. Thanks for investing in our future, Mr. Treasury Secretary!
|