by Barry Grey
12 January 2010
A financial scandal has erupted that implicates Treasury Secretary Timothy Geithner in efforts to conceal the funneling of $62 billion in taxpayer funds to 16 large banks as part of the government bailout of the insurance giant American International Group AIG.
The revelations coincide with the imminent announcement by the big US banks of their profits and year-end bonuses for 2009. Most of the major banks are expected to report huge profits—in the case of Goldman Sachs, its highest profits ever—and combined bonuses of $30 billion or more.
On January 7, Congressman Darrell Issa, the ranking Republican on the House of Representatives Committee on Oversight and Government Reform, released emails he had obtained from AIG showing that between November of 2008 and March of 2009, the Federal Reserve Bank of New York pressed the bailed out company to delay or withhold critical details of arrangements between it, its major bank counterparties and the Fed.
The most important of these was the government’s decision to pay off the banks at 100 cents on the dollar for billions of dollars in credit default swaps they had purchased from AIG, which the company could not redeem.