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Econwatch
November 17, 2009 11:16 AM

TARP Audit Finds Geithner Gave Away The Farm

By
Jill Schlesinger
Topics
Financial Decoder

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

Special Inspector General for TARP (aka "SIG TARP") Neil Barofsky said something we've all known for a while: the AIG failed.

If you recall, AIG's failure meant that the companies on the other side of all of its contracts (counterparties) were going to be left holding the bag. Under normal cases of bankruptcy, the court would impose haircuts to the amount of money due to counterparties, but because AIG didn't actually declare bankruptcy, the counterparties claimed that they were owed 100 cents of every dollar. The only bank that even considered taking a haircut was UBS - the Swiss, for goodness sakes - hard to imagine that a Swiss bank could make US banks look bad, but here's a case in point.

OK, so let's get this straight: the financial world is melting down, Uncle Sam had just saved the bankers' butts and now Tim Geithner the President of the Federal Reserve Bank of New York (FRBNY) was going to wimp-out? Yes, the Great Gazoo strikes again! (My friend pointed out that our current Treasury Secretary and former tax cheatbears a striking resemblance to this esoteric character from "The Flintstones" — Geithner has been the Great Gazoo since!)

(You Tube)

When Geithner/Gazoo says, "Hello Dumb Dumb," he's talking to us! The Great Gazoo shafted the US taxpayer in the AIG debacle and in the process, enriched the counterparties who dragged us into this mess. The SIG TARP reportnoted that "structure and effect of the FRBNY's assistance to AIG ... effectively transferred tens of billions of dollars of cash from the government to AIG's counterparties."

Oh, and remember all of those claims by Goldman Sachs brass that the firm had "perfectly hedged" its exposure to AIG? Not so fast, boys. According to the New York Times, "among its notable findings, the report challenged Goldman's position that it should not have been forced to bear losses on its dealings with A.I.G. because it had successfully hedged away any exposure. Mr. Barofsky said that Goldman's hedges were unlikely to have held up amid the market turbulence of late last year."

Barofsky seems to be one of the few officials that has to tell us what we already know: TARP is "almost certainly going to be a loss" for taxpayers and Geithner rolled over for Wall Street in the AIG negotiations.

More on MoneyWatch:
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•Investing Lessons ... from Strawberries?

(CBS)
Jill Schlesinger is the Editor-at-Large for CBS MoneyWatch.com. Prior to the launch of MoneyWatch, she was the Chief Investment Officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.

  • Jill Schlesinger

    >> View all articles

    Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.

Add a Comment See all 32 Comments
by bubbee4 November 20, 2009 5:41 PM EST
President Obama made the fatal mistake of surrounding himself with bankers and lobbyists for multinational corporations. Geithner & Summers shouldn't have even been considered for the positions they're in.
Jon Stewart often asks this question of his political guests, none of whom have given him a satisfactory answer: Instead of shoveling taxpayer money into the coffers of the big banks who are responsible for this whole depression we're sinking into, why didn't we just use all that money to pay down the principal of millions of peoples' mortgages? This "bottom-up" approach would have had the added benefit of taking all those toxic assets off the banks' books.
All 3 branches of our government (and BOTH parties) have been corrupted by corporate money, & I can't see any solution that doesn't involve fundamental structural upheaval.
Reply to this comment
by midlclass November 23, 2009 1:10 PM EST
I agree, i believe the bottom up would have helped alot of people and banks at the same time. it might have been better to evaluate the loans that are in default and brought the loan into line with the wages of the defaultee. and or readjusted interest rates, there could have been other ways to attack this problem that would have hlped out the little guy instead of the big guy, and kept the economy rolling
by truth-b-toll November 19, 2009 11:47 PM EST
will America ever wake up to the fact that it's not a gop vs dem thing.
it's CLASS WARFARE !
Reply to this comment
by theoriginallavoce November 19, 2009 11:30 PM EST
Above the fold, the Thursday, 10/09/08, business page of THE OREGONIAN carried the pic of a striking young man who looked very much like a bald, young Tellie Savalas. The pic was followed by an article, by AP's Allen G. Breed, entitled "The $700 billion man."

Prior to his appointment as czar of the Treasury's $700 billion financial bailout, by U.S. Treasury Secretary Henry Paulson, 35-yr old Neel Kashkari was a space engineer working on the James Webb Telescope. He had both bachelor's and master's degrees from the Univeristy of Illinois, Urbana-Champaign.

Kashkari had made an abrupt 'about face' in his career which surprised even his family. It wasn't clear who he had met, or what information, might have motivated him to do so.

Suddenly, at a time of seemingly great success, with a "major pattern interupt," Neel Kashkari enrolled in an MBA course of studies at the University of Pennsylvania's Wharton School. The article reveals how Neel and Henry Paulson became acquainted, and how Neel went to work for "Hank" in our Nation's Capitol. It's a wonderful success story!

Neel is one of many individuals on Capitol Hill who have had connections with Goldman Sachs, and is also one of the employees barry soetoro aka/alias barack hussein obama kept on in the Treasury Department - which may, at the moment, still be 'under-staffed.'

Geithner's journey into the U.S. Treasury was fraught with controversy, and still is. Where did his conflicts of interest begin? To whom, and where, will the path lead before this 'over-achiever' is dismissed from the Treasury, and relieved of his responsibilities? Will AMERICA ever regain the funds from "the farm that Geithner gave away?" How? When?

Of this we can be certain: With teleprompters everywhere, no man acts alone in this present administration.

Surely more details about Geithner's journey are about to unfold.
Reply to this comment
by jsc173 November 18, 2009 6:00 PM EST
Uh. What took you guys so long? As "insiders" have kknow for a couple of years, this isn't a Democrat "thing" or a Republican "thing", it's a Goldman "thing."

Clear evidence of that is their CEO's affirmation that they are doing God's work, so they must be doing the right thing. Right?

I mean, you don't really thnk there was some sort of conspiracy here, do you? Really? Duh.
Reply to this comment
by Saint_Pitbull November 18, 2009 1:02 PM EST
Ms. Schlesinger, please head to the front door to pick up your final check from CBS for daring to call into question any actions of the Marxist in Chief.
Reply to this comment
by actornaught November 18, 2009 12:17 PM EST
Funny the article doesn't say when this happened, over a year ago, and not just under w's watch, but commited by his own administration, without any involvement from congress.
Reply to this comment
by Mokkie57 November 17, 2009 6:16 PM EST
Tim Geithner needs a cell next maddoff.
Reply to this comment
by inventagod November 17, 2009 3:50 PM EST
Electro-shock therapy needed at the top...
Reply to this comment
by Mortarman-29 November 17, 2009 4:40 PM EST
Or a padded room.
by bubbadubba November 17, 2009 3:28 PM EST
Just like Bush's Paulson gave away the farm.
They are all in on it and the same people who caused the destruction of the economy are still running the show so they can keep us down and buy up the country cheap.
Reply to this comment
by Mortarman-29 November 17, 2009 4:33 PM EST
You notice how the libs on here cant just say "wow, that was wrong og Geightner to do that."

No, they ALWAYS have to compare whatever is going on to Bush or one of his administration.

Why cant you guys just for once, go "hey, that aint right" without mentioning someone currently out of office. Try it!
by EasyE_ November 18, 2009 2:28 PM EST
I am very conservative and I agree with bubbadubba. Bush sold us out, Obama is selling out the futures of our children.
by cbsblogger November 17, 2009 3:28 PM EST
American taxpayers have been shafted by Geithner and all his deputy Goldman proteges for the benefit of the same Wall Street hucksters that caused the economic collapse. In the end this boondoggle will cost everyday Americans trillions of dollars. Even slick Madoff couldn't have done it any smoother than what these shysters did. Apparently it is in the DNA. Once a cheat always a cheat and we all should have been outraged when Geither the tax cheat was moved from Federal Reserve to Sec of Treasury as well as many of his like minded underlings.
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