New York Fed’s Secret Choice to Pay for Swaps Hits Taxpayers

[AllentownJake]

Oct. 27 (Bloomberg) -- In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter.

Among AIG’s bank counterparties were New York-based Goldman Sachs Group Inc. and Merrill Lynch & Co., Paris-based Societe Generale SA and Frankfurt-based Deutsche Bank AG.

http://bloomberg.com/apps/news?pid=20601109&sid=a7T5HaOgYHpE

Basically this article says that AIG executives were trying to negotiate the payment down and Timmeh stepped in and made the payments $ for $. This amounts to a second bailout that the Government paid for and will never be paid back for.

Go Timmeh!

[gratuitous]

1. That's some shrewd negotiating

Buy a pile of shit investments at par value. Real nice if you're the one holding the investments; not very bright if you're the one paying for them. You'd think that the buyer would have a little leverage, but Mr. Geithner made sure that his old (prospective?) bosses at Goldman Sachs wouldn't take a bath on their bad decisions.

But as long as Mr. Geithner is in a buying mood, I have here in my pocket a very valuable rock.

[AllentownJake]

4. Question

Can you give Mr. Geithner a job after he leaves Treasury. If so he might have some use for your valuable rock.

[notesdev]

2. How do I get in on this gravy train?

I'll draw up a bunch of fraudulent investments, put them "off-balance sheet", and claim they are worth... oh, say, a mere billion or so (I'm modest). How do I get Treasury and/or the Fed to buy them?

[AllentownJake]

3. You are going to have to move to Manhattan

and design some sort of financial instrument that will totally destroy the economy. Set it off to explode and the government will hand you a whole bunch of money to do it again in a few years.

[JackRiddler]

11. That's basically what happened.

The big banks put in bets with each other with a cumulative nominal total six times greater than all the wealth on the planet. As these go wrong, because they banks are too big to fail, the government steps in to borrow and print money so as pay off their wish sums. (Down the line that government's own bonds will be downgraded by the very same ratings agencies that should have been shut down as the center of all fraud at the beginning of the crash.)

[glitch]

12. I am afraid it will require longterm membership in the same country club Timmeh attends.

And by longterm I mean since birth. So, you know, sorreh.

[dysfunctional press]

5. i'm not seeing any way that i can support obama in 2012.

there are going to have to be some VERY DRASTIC changes in his administrations policies.

[AllentownJake]

6. To be fair

This happened under Bush and Paulson....but than Obama made Geithner the Treasury Secratary and re-appointed Bernake.

I take that as a tacit endorsement.

[dreamnightwind]

17. Agreed

But we have to make sure we get a serious person to challenge him in the primaries, and one that is not in "the club". That rules out HRC. Dean? Kucinich? Weiner? How about a plain and soft-spoken old-timer like Bill Moyers? Or some benevolent rich guy, not sure who that would be though.

It'll take money, a ton of it, but if enough people believe in the messenger, the money will be there. Half of Obama's money came from people like us, and that's a lot of money. We can actually do it.

Even if it fails, there HAS to be a serious challenge to these policies from the left, to put the thought of accountability into the minds of the corporate politicians.

[dysfunctional press]

18. if healthcare ends up an epic FAIL (whether it passes or not), and we're still bogged down...

in pipeline-istan, i could definitely see the opportunity for a third-party populist pull in a lot of votes.

which would of course fuck things up even worse if they were elected- as both house of congress would probably be bi-partisan in their opposition.

so- i'm hoping that obama gets it right(his afghan decision will be telling), but if not- i hope that we could get a decent democrat to run in 2012.

and maybe alan grayson could be the benevolent rich guy you mention?

a black guy followed by a jewish guy...some areas of the country might get kind of messy, what with all those heads exploding, and all.

[dreamnightwind]

19. Grayson is good...

though it concerned me when Weiner said Grayson is "one fry short of a Happy Meal". I'll keep watching Grayson, wasn't aware of him until recently.

Another suggestion: Al Franken!

[dreamnightwind]

20. re 3rd party populist...

I wouldn't be at all surprised to see this happen, unfortunately (or not, hard to say) it will probably come from the right. I think it was Chris Hayes of The Nation who mentioned on the tube (yesterday?) that he thought Fox might attempt to leverage the Tea Party thing into a 3rd party candidacy that they support. Scary thought, though they'd be fighting the Repubs for votes.

What I'd really like to see would be a true centrist populist. Many on the left and right are fed up with corporate thievery, and we have a lot of common interests. Only a few wedge issues divide us. It would be an uncomfortable marriage, but one that could help heal the dangerous polarization of this nation.

[Octafish]

7. AIG got $182 Billion and HOW much went to Goldman Sachs?

$14 Billion? And HOW much of THAT went to foreign-owned banks?

Friedman. Stephen Friedman. Hope he's in the Witness Protection program.

[AllentownJake]

8. Why would he need that

Do you think this administration wants to prosecute what happened?

:rofl:

[bvar22]

9. And yet, thre are posters on DU who insist....

...that all the money has been paid back and everything is now just peachy.

It took the Democratic Controlled Congress LESS than a week
to hand the money over to Wall Street with no strings attached,
but they can't manage a decent "Public Option" for regular Americans

NOW we have Your Children’s Money too !!!
And there is not a fucking thing you can do about it!
Now THIS is “Bi-Partisanship” !
Better get used to it!!
Hahahahahahahahaha!

[AllentownJake]

10. There are some posters on DU

That don't want to discuss what just happened because it doesn't fit into their narrow cowboys and indian football mentality.

[OnceUponTimeOnTheNet]

14. To be fair, Cedit Default Swaps are a pretty abstract thing to wrap ones

mind around, to say nothing of the size of it. Takes time and perseverance. Hang in there Jake, more are waking up every day.
K&R

[AllentownJake]

15. I don't see what is so hard to understand

Businesses are placing bets and when the bets happen the companies that took the bets fail the gamblers are being paid by the government.

You don't need to understand the equation to get that.

[OnceUponTimeOnTheNet]

16. Willful ignorance? Who knows. nt

[Skittles]

21. it's painful how they twist themselves into pretzels with excuses

I expect better on a progressive board :thumbsdown:

[glitch]

13. There are several fucking things we can do about it. nt