Submitted by Janet Tavakoli of Tavakoli Structured Finance
Pulitzer Prize winner Gretchen Morgenson of the New York Times wrote a must read article ("Revisiting a Fed Waltz with AIG," November 21, 2009) on Sunday in which she recaps salient points from the November 17, 2009 report of the Office of the Special Inspector General (Neil Barofsky) for the Troubled Asset Relief Programs, "Factors Affecting Efforts to Limit Payments to AIG Counterparties," and wrote:
On the question of whether this payout was what the report describes as a "backdoor bailout" of A.I.G.'s counterparties, Mr. Barofsky concluded: "The very design of the federal assistance to A.I.G. was that tens of billions of dollars of government money was funneled inexorably and directly to A.I.G.'s counterparties." (T)his was money the banks might not otherwise have received had A.I.G. gone belly-up.
Timothy Geithner's interaction with the New York Times, first in his role as President of the FRBNY and later as Treasury Secretary, seems to be that of a bailout enabler and a PR spin doctor for Goldman Sachs. Based on the Sunday article's revelations, I would not characterize his behavior as that of "a good man in a storm;" he seems a mere water-boy:
According to an e-mail message that Goldman sent to the New York Fed at the time (September of ‘08), Mr. Geithner talked about the article with Mr. Viniar, Goldman's chief financial officer, before calling me. When Mr. Geithner called, he said that Goldman had no exposure to an A.I.G. collapse and that the article had left an incorrect impression about that. When I asked Mr. Geithner if he, as head of the regulatory agency overseeing Goldman, had closely examined the firm's hedges, he said he had not. Mr. Geithner told me on Friday that he spoke with Mr. Viniar that day to ensure that Goldman's hedges were adequate. And, notwithstanding the inspector general's findings, he said he still believes Goldman was hedged."
Prior to the article's publication, Goldman Sachs responded to Ms. Morgenson's questions about the Barofsky report via an email from its spokesman Lucas van Praag. The entire exchange can be found here "Goldman's Response to Questions About A.I.G.," November 22, 2009.
