2009 1119 - GOV JEC - Financial Regulatory Reform - Protecting Taxpayers and the Economy
- (p8) - Tim Geithner: AIG presented exactly the same kind of risk Lehman did.
- But, in some ways, they were greater—because AIG as an insurance company, one of the largest in the world, was providing a range of insurance products to households across the country.
- And if AIG had defaulted, you would have seen a downgrade leading to the liquidation and failure of a set of insurance contracts that touched Americans across this country and, of course, savers around the world.
- (p35) - Representative Burgess. If we would just get out of the way, I firmly believe that the resolve of the American people is enough to solve this.
- I have lived through up-and-down cycles in my life.
- I have seen some terrible things happen to the economy back home in Texas, when the savings and loans melted down.
- I don’t recall anyone from the Treasury Department or the FDIC coming with a big bag of cash and saying, ‘‘Can I help you through these tough times?’’
- Secretary Geithner [continuing]. Oh, to the contrary——
- Representative Burgess. No, we were required to get through it ourselves.
- Secretary Geithner [continuing]. To the contrary——
- Representative Burgess. We cut spending. My business drew in its resources and kept going through that time. We didn’t depend upon the government for help at that time.
- Representative Burgess. So you are on record as being opposed to dithering?
- Secretary Geithner: Now, the S&L crisis was incredibly expensive for this country.
- It cost the taxpayers 2 to 3 percent of GDP.
- It was not a crisis solved by the market.
- It was a crisis where the taxpayer was put on the hook for enormous losses and risks.
- And we are doing a very good job of limiting the taxpayers’ exposure to risk in this, as I said in pointing out to you that we have $70 billion of taxpayers’ money come back since I took office, at more than $12 billion in dividends and warrants.
2009 1120 - NAIC to GOV - to Carolyn B. Maloney, Chair Joint Economic Committee - 1p
We are writing to correct a misstatement by Treasury Secretary Timothy Geithner at the Joint Economic Committee’s November 19, 2009 hearing, titled “Financial Regulatory Reform: Protecting Taxpayers and the Economy.”
- Secretary Geithner asserted that the reason for the federal government’s bailout of AIG was a fear that AIG might not have been able to pay claims to its insurance policyholders.
- That flies counter to the Treasury Department’s long-held assertion that the bailout was needed to prevent financial loss to AIG’s counterparties in its credit default swap (CDS) transactions.
- It also belies the facts.
- AIG’s state-regulated insurance subsidiaries were, and still are, safe and solvent.
- Money to pay policyholders was protected from being used for other purposes, and was never at risk.
- That is because of to state insurance regulators’ ability to “ring fence” solvent insurance entities of a group to shield them from the parent’s corporate losses or bankruptcy in order to protect consumers.
- This change in rationale by Secretary Geithner is confusing at best, misleading at worst.