Report Says New York Fed Didn’t Cut Deals on A.I.G. as Promised

There is only one problem with this statement below, the head of the Federal Reserve Bank of New York at the time  and his people lied as they said they were negotiating settlements with 16 AIG creditors which dropped to eight (8) and then only four (4) were contacted to negotiate a settlement which never happened.

The bank said in a statement Monday that it had “put together an effective lending program that minimized disruption to the economy from A.I.G. while safeguarding the taxpayer interest.” 

The NY Fed, headed by now Secretary of the Treasury, Timothy Geithner, paid full price for the AIG debt and did not negotiate a settlement for the American Taxpayers.  Is this why Geithner wanted out as Treasury Secretary as he knew the results of the investigation would be coming out?  Would suggest that Mr. Geithner's resignation now be accepted with this investigation showing he lied about the negotiations or is this one of those "I didn't know moments" that is going around with government officials and candidates now.

Once again the taxpayers got the short end of the stick thanks to the NY Fed and too big to fail mentality! 

Report Says New York Fed Didn’t Cut Deals on A.I.G.
By BINYAMIN APPELBAUMPublished: October 31, 2011 

WASHINGTON — The findings of a federal investigation released Monday raised new questions about the Federal Reserve Bank of New York’s handling of the 2008 bailout of American International Group.  

The report, by the Government Accountability Office, says that New York Fed officials have offered inconsistent explanations for their decision to pay other financial companies the full amounts they were owed by A.I.G., and that some of the explanations were contradicted by other evidence.  

The report also asserts that the decision to pay the full amounts, rather than seeking concessions as the government later did in other cases, disregarded the expectations of senior Fed officials in Washington and the expressed willingness of some of the companies to accept smaller payments.  

In one case, when a company offered to accept a smaller amount of money, officials at the New York Fed responded that they had decided to pay the full amount of the debt, the report said.
The agency’s report revisits a controversial chapter in the history of the financial crisis: the government’s decision to sink tens of billions of dollars into A.I.G., the world’s largest insurance company, which was running out of money to cover its vast and losing bets on the health of the housing market. Much of that money was then paid to other companies to honor their outstanding contracts with A.I.G.  

The basic conclusion echoes the findings of previous federal investigations. The rescue mission succeeded, but efforts to minimize the costs and risks borne by taxpayers were insufficient. But the new report also raises concerns about the explanations subsequently offered by New York Fed officials.  

For example, the G.A.O. says that officials at first told its investigators that they had initiated discussions about possible concessions with most of the 16 companies that stood on the other side of insurance-like contracts, called credit-default swaps, with A.I.G.  

Then, according to the report, the officials said they had contacted eight companies before abandoning the effort. Even then, the report said, only four of those companies confirmed that they had been contacted by the Fed.

The New York Fed declined to comment on the specific account of the negotiations. Officials of the bank, including Timothy F. Geithner, then the president of the New York Fed and now the Treasury secretary, have testified that they needed to act quickly to prevent greater damage to the financial system, and that they chose the approach that was most likely to succeed and easiest to enact.  

Source:  New York Times