Page last updated at 19:11 GMT, Wednesday, 27 January 2010

Timothy Geithner defends AIG bail-out

AIG sign
Mr Geithner said letting AIG fail would have been catastrophic

US Treasury Secretary Timothy Geithner has told a congressional panel he acted properly in the bail-out of AIG.

Mr Geithner was head of the New York Federal Reserve at the time of the insurer's bail-out in 2008.

Regulators have been criticised for paying AIG's counterparties face value for assets and for keeping details of the deals secret.

But Mr Geithner said he had no role in the disclosure of the financial terms of the deals.

"I was not involved in decisions about what to disclose about the individual transactions or the names of counterparties," he said.

"But I have enormous trust and confidence in the integrity and judgment of those who were."

Mr Geithner was appearing before the House Oversight Committee.

AIG was initially bailed out for $85bn (£52bn), but its total rescue package has since amounted to more than $180bn.

'Lame excuses'

President Obama nominated Mr Geithner for Treasury Secretary on 24 November 2008.

The steps the government took to rescue AIG were motivated solely by what we believed to be in the best interests of the American people
Treasury Secretary Timothy Geithner

On that date, "I withdrew from monetary policy decisions... and day-to-day management of the New York Fed," Mr Geithner said.

But the committee were sceptical of his claim.

"Many people, including people of this committee, have a hard time believing Secretary Geithner entered into an absolute cone of silence," said California Representative Darrell Issa, the committee's top Republican.

"I believe these are lame excuses," Republican John Mica said. "Why shouldn't we ask for your resignation as Secretary of the Treasury?"

'Catastrophic consequences'

Mr Geithner also defended the decision to pay the counterparties, including Goldman Sachs and other Wall Street banks, face value for assets.

"The counterparties held insurance entitling them to full or par value of the contract. We could not credibly threaten not to pay. That meant putting AIG into bankruptcy," he said.

But the committee's chairman was furious at the decision.

"In effect, the taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street came by and looted the corpse," said Representative Edolphus Towns, a New York Democrat.

"The steps the government took to rescue AIG were motivated solely by what we believed to be in the best interests of the American people," Mr Geithner said.

"We acted because the consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses."

Former Treasury Secretary Henry Paulson also appeared before the committee.



Print Sponsor


SEE ALSO
Probe launched into AIG bail-out
26 Jan 10 |  Business
NY Fed 'paid AIG banks too much'
17 Nov 09 |  Business
AIG posts second quarterly profit
06 Nov 09 |  Business
AIG posts first profit since 2007
07 Aug 09 |  Business
Boss to quit ailing insurer AIG
21 May 09 |  Business
AIG: What does this US giant do?
18 Mar 09 |  Business

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites



FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC iD

Sign in

BBC navigation

Copyright © 2020 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific