Congressman Lynch Rips into Geithner

Congressman Stephen F. Lynch is a former ironworker. My father is a retired ironworker. I can tell you from personal experience, you do not want to get an ironworker riled up. These guys get very passionate and have no fear as shown in this video of yesterday’s discussion between Rep. Lynch and Treasury Secretary Timothy Geithner.

-Glenn

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2 responses to “Congressman Lynch Rips into Geithner

  1. Having not heard the entire hearing besides this, it certainly leaves me wondering if Lynch is on to something or if Geithner really had no leverage. I wonder if what really happened was that they realized after Bear Stearns, if they let everyone fail, America would fail. But I see Lynch’s point– couldn’t a better deal have been negotiated, rahter than simply bailing out AIG and letting everyone dependent on them recover 100% from them? Great post!

  2. I’m guessing it got down to dicey legal issues. If I understand Geitner’s point…

    In order to say to a holder of a credit default swap – “I can only pay you 50 cents on the dollar”, AIG would have had to default or declare bankruptcy. Had they done that, hundreds of other financial institutions would have become insolvent over night since the only thing holding together their books was the insurance from AIG backing their paper assets.

    So, without having the option to declare bankruptcy, AIG, via taxpayer dollars, made good on their policies.

    It was in fact a back door bailout, not really that much different than the direct bailout money.

    Also, it would have been obvious to any insider where the money was going. For a congressman not to have known that is a little embarrassing. AIG wrote policies to back bank assets that went bad. When AIG runs out of money in the middle of a financial crisis, and needs it to pay out, where did he think the money was going to go? It took me about 60 seconds of thinking about it to figure it out.

    I’d give Geitner the benefit of the doubt that cutting a deal would have required AIG to go under, which would have killed hundreds of other financial institutions.

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