Teapot Dome 2.0?
Repost from Jesse’s Cafe…
“I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals — too many counterparties, too many lawyers and advisors, too many people from AIG — to keep a determined Congress from the information.” James P. Bergin, NY Fed, in an email to his Fed colleagues.
‘Though it is hard to divine much understanding from the unredacted filing, it has become clear that Goldman had more involvement than previously believed: In addition to the credit default swaps it bought from AIG, the filing shows that Goldman Sachs also originated many of the underlying assets that AIG and the New York Fed bought back from Société Générale.
The American people have the right to know how their tax dollars were spent and who benefited most from this back-door bailout,” said Kurt Bardella, spokesman for Issa. “Now that it’s public, let’s see if the sky really does fall as the New York Fed said it would to justify its coverup.”
Other lawmakers believed that the New York Fed was trying to hide its ties to Goldman Sachs.’ AIG Reveals the Story – CNN
“Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny…
By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve
This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank…
New York Fed staff and outside lawyers from Davis Polk & Wardell edited AIG communications to investors and intervened with the Securities and Exchange Commission to shield details about the buyout transactions, according to a report by Issa.
That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself.” Secret Banking Cabal Emerges From AIG Shadows – Reilly – Bloomberg
And this is the same Federal Reserve that was proposed by the Obama economic team to be the ‘super regulator’ with broad powers and consumer protection responsibilities over the entire financial system.
The Fed is a private agency, quasi-governmental, but not subject to discretionary audit or review by the government, except at arms length, through managed testimony. They make a point of demanding secrecy and independence at their own discretion, oversight on their terms.
This is a choice promoted by Geithner and Summers, who are creatures of the Fed and the banking system, almost sure to return to sinecures there after leaving government. And it is tempting choice for a president and congressmen of a weak character. If the Fed bears the responsibility they do not have to budget money and manage the process, and they can point fingers at its every failure. It is a formula for conflicts of interest, soft bribery and corruption. Confidence does matter.
The Fed and Blackrock are becoming to the Obama Administration what Halliburton and KBR were to Bush and Cheney, and the banking crisis — the new Iraq. Can the handling of it be so inept that it becomes Obama’s Watergate as well?
The Fed must be audited, and its power to disburse public money to private banks, except in the normal course of open market operations, curtailed. Only the Congress has the right to tax the people, and the Fed’s ability to disburse billions of funds at its own discretion to domestic and foreign banks is a de facto form of taxation, since the Fed operates on a cost plus basis, without budgetary allotment from the Congress. The obligations of the Federal Reserve flow directly from its balance sheet, which is the basis for the national currency.
And despite the arguments from the Financial Times to ‘stop snooping’ the press and the Congress should delve deeply into the AIG bailout, because enough has already been exposed that it smells to high heaven.
It is remniscent of Watergate and Enron to see Timmy, Ben, and Hank falling all overthemselves in establishing that they had no knowledge or involvement in the payments of billions to AIG.
The truth must come out.
My own suspicion is that Goldman ‘set up’ AIG for a proper face ripping with its financial arrangements, playing both sides of the deal. There is further evidence of money flowing from Goldman to AIG executives before the bailout occurred. And at the least the major players saw what was happening and turned a blind eye to it, busying themselves with other things and establishing their plausible deniability.
A proper investigation can establish any specific guilt. It is a shocking scandal that the FBI and Justice Department are still not more actively involved in real investigation rather than these staged hearings.
But this incident should make it absolutely clear why the Fed cannot enjoy the expansion of its role as the regulator of the system. It is too conflicted in its mission of monetary independence, and at the same time the creature of the banks, to be a true civil servant fully answerable to the Congress.
Yes I understand the distinctions between the Fed Board of Governors and the NY Fed with regard to FOIA requests, and the appointmet process. What I am saying is that the distinctions obviously do not hold, do not work. The Fed is one organization. These distinctions are remniscent of the banking scandals exposed by then AG Elliot Spitzer. They simply do not work. They are a thin facade.
As Representative Marcy Kaptur told Geithner at the hearing: “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.”
One difference I have noted, compared to the English and the Japanese, is that the American officials and CEO’s never hesitate to hide behind the incompetency defense, but rarely have the dignity to resign when they do so. This is because they have no shame, no real loyalty to anyone but themselves.
And at the very least Geithner should be fired, if not for complicity, then for sheer inability to do the job.
Timeline of NY Fed Payments and Cover-Up: BusinessWeek
Financial Crisis Ahead – Thomas Donlan – Barron’s
Paulson’s People Colluded with Goldman to Destroy AIG and Get a Backdoor Bailout – Fiderer – Huffington
Sham Transactions That Led to AIG’s Downfall – Fiderer – Huffington