Geithner Dragged Into AIG Quagmire

Geithner dragged into AIG quagmire
Commentary: Treasury Secretary breaks the golden rule

http://www.marketwatch.com/story/gei...k=MW_news_stmp

1/12/2010

NEW YORK (MarketWatch) -- Treasury Secretary Timothy Geithner should heed the lessons of Martha Stewart and Richard Nixon: It's not the crime, it's the cover-up.

That's the issue as Geithner sinks slowly into the American International Group Inc. /quotes/comstock/13*!aig/quotes/nls/aig (AIG 29.33, -0.30, -1.01%) quicksand. For months, Geithner, as head of the New York Federal Reserve, was considered a bystander, a witness and at worst an accomplice, when the government and the Federal Reserve OK'd and, indeed, structured the payouts on credit default swaps from AIG to Wall Street. See report on AIG and Geithner.

Now, emails gathered by Rep. Darrell Issa, the ranking Republican on the House Oversight and Government Reform Committee, suggest that Geithner played an even more sinister role: pressuring AIG not to disclose how and to whom CDS payments would flow.

Big banks including Deutsche Bank AG /quotes/comstock/13*!db/quotes/nls/db (DB 74.88, -1.54, -2.02%) and Goldman Sachs Group Inc. /quotes/comstock/13*!gs/quotes/nls/gs (GS 170.03, -1.53, -0.89%) were paid full value of their CDS interests even though the value of those contracts may have been severely discounted in the market.

Whereas the payments and authorization by the government drew condemnation and finger-wagging, the fallout from Geithner's effort to squelch disclosure has damaged his influence and standing as a leader of reform. See report on hearings.

Skeptics pointed to Geithner's active appointment schedule with Wall Street's elite during his time as president of the New York Fed as evidence of his true allegiance. These meeting included lunches with brokerage CEOs at such power haunts as the Four Seasons and corporate dining rooms.

Geithner looks bad enough by being in the same room with AIG. He looks downright filthy in trying to keep the nosy public from following the money -- its own money.

He may survive the outcry and the congressional hearings being threatened, but as an effective proponent of Wall Street reform, he's lost credibility.