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Geithner draws fire defending Fed on AIG bailout

WASHINGTON — Democrats and Republicans alike pummeled Treasury Secretary Timothy Geithner on Wednesday over his role in the $180 billion bailout of insurance giant AIG Inc., venting public anger over Wall Street's return to prosperity while unemployment stands at 10 percent.

Geithner, one of the original architects of the government's 2008 response to the financial crisis as president of the Federal Reserve Bank of New York, defended the use of taxpayer money as necessary to head off "potentially catastrophic damage to the economy."

But members of the House Committee on Oversight and Government Reform hammered away at why regulators allowed American International Group to pass on billions of the bailout money to big Wall Street banks that were business partners.

"In effect, the taxpayers were propping up the hollow shells of AIG by stuffing it with money. And the rest of Wall Street came by and looted the corpse," committee Chairman Edolphus Towns, D-N.Y., told Geithner.

Geithner vigorously defended his record. "Deciding to support AIG was one of the most difficult choices I have ever been involved in, in over 20 years of public service. The steps that were taken were motivated solely by what we believed to be in the public interest," he said.

Lawmakers are concerned with revelations about efforts to keep details of the AIG deals secret. Officials from the Treasury Department and the New York Fed worked to keep the public from learning details about those deals and other AIG decisions.

"Either you made a bad decision there, or there was the attempt to cover up one of the biggest bailouts, backdoor bailouts, in history," Rep. John Mica, R-Fla., told Geithner.

"I played no role in those decisions," Geithner replied.

Although Federal Reserve chairman Ben Bernanke and Geithner have taken the most heat, the government's bank rescue effort began in 2008 under former President George W. Bush and Henry Paulson, his treasury secretary.

Rep. Elijah Cummings, D-Md., asked Paulson, who followed Geithner at Wednesday's hearing, if he didn't realize how angry people were at wealthy bankers and Wall Street barons.

"Congressman, you've got it. People are very, very angry. … They don't recognize that what was done wasn't done for the banks" but to save the nation's financial system and economy, Paulson replied.

Geithner draws fire defending Fed on AIG bailout 01/27/10 [Last modified: Wednesday, January 27, 2010 10:15pm]
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