NYFed Emails About AIG Coverup Now Public
The leaks continue apace:
The day after Vice Chairman Kohn testified before Congress, it started dawning on the FRBNY that they weren’t going to be able to keep the names of counterparties from Congress.
FRBNY staff member James Bergin e-mailed several other FRBNY staff:
“I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals – too many counterparties, too many lawyers and advisors, too many people from AIG – to keep a determined Congress from the information.” 62
Fascinating stuff . . .
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62 E-mail from James Bergin to Alejandro LaTorre et al, March 6, 2009, BATES #FRBNY-TOWNS-R3-008604.
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Source:
Public Disclosure As A Last Resort: How the Federal Reserve Fought to Cover Up
the Details of the AIG Counterparties Bailout From the American People
Special Report
U.S. House of Representatives , 111th Congress
Committee on Oversight and Government Reform
January 25, 2010
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January 25th, 2010 at 9:00 pm
It may get ugly for the deserving once the information leaks become a info-dam break.
And for anyone who is still looking for a reason to replace Ben, see Steve Keens post
with a PDF to send to your senator:
“The US Senate should not reappoint Ben Bernanke. As Obama’s reaction to the loss of Ted Kennedy’s seat showed, real change in policy only occurs after political scalps have been taken. An economic scalp of this scale might finally shake America from the unsustainable path that reckless and feckless Federal Reserve behavior set it on over 20 years ago.
Some may think this would be an unfair outcome for Bernanke. It is not. There are solid economic reasons why Bernanke should pay the ultimate political price.”
http://www.debtdeflation.com/blogs/2010/01/24/debtwatch-no-42-the-economic-case-against-bernanke/?cp=all
January 25th, 2010 at 9:01 pm
The hits just keep on coming. Next.
January 25th, 2010 at 9:08 pm
The bulk of our so-called government is one gigantic (can’t stand the word ginormous, WADR) stinking mass of secrets. Piled on each other like a stack of the garbarges that haul our detritus out to sea.
The length, depth and breadth of the coverups,CYAs, and dead people who knew too much in all branches of ‘government’ would likely drown all of us if it got loose.
It seems that the time of our elected representatives is spent in managing the damage of their boneheaded mistakes (mistakes were made, yeah but no one made them, sure), shortsighted patches, intentional ripoffs, machiavellian schemes, and pure out and out lies right to our faces, compose their average day, beginning with campaign promises.
How illuminating it would be be if we could rip the tops off of the Capitol building, the White house, the Treasury, The FED, and the seat of our government at 85 Broad, and watch these cockroaches scurry for the nearest cover, chasing them with Terminix insecticides.
January 25th, 2010 at 9:20 pm
so the more of this that sees the light of day- when are you going to concede that the Treserve may- just may- have been involved- in hushed tones of course- in the manipulation of the stock market-
of course- you got yours- so maybe that is why you are so quiet
January 25th, 2010 at 9:30 pm
Lots of “conspiracy” truths are simply made up. Beware of the made up hoaxes:
- “No steel frame building has ever collapsed from fire”
- “Osama was working with the CIA/Jews., etc”
- “Key people in the tower were warned and all away on the same business trip to an air force base in the midwest with Warren Buffet”
Remember all these blatant lies. The blatant lies about Clinton, GWB, Aliens, Vietnam, the Soviets, etc.
There really is not that much to be “afraid” of… people make shit up… and some people are addicted to it. There is really little that is exciting about AIG, NY Fed, TARP, etc. Its boring. Its not perfect. But its not evil.
January 25th, 2010 at 9:32 pm
This may not be as s sinister as you think. It may be “Does anyone have a fucking clue as what’s going on here?” “Oh, was that email mail you sent me one of the 836 messages I deleted that day?”
January 25th, 2010 at 9:39 pm
Deep Throat said, “follow the money”. The obvisous countermove is to try to make that impossible.
January 25th, 2010 at 9:39 pm
I hope the Bloomberg FOIL suit bears fruit soon
January 25th, 2010 at 9:40 pm
edit: obvious
January 25th, 2010 at 9:56 pm
I hope the Bloomberg FOIL suit bears fruit soon
Yves Smith and Thomas Adams make a compelling (but fairly esoteric) case that a lot of the Maiden Lane III transaction is already in the public domain — making the Fed’s case for secrecy moot. They put a lot of work was put into making a model using already available information.
http://www.nakedcapitalism.com/2010/01/further-discussion-of-maiden-lane-iii-analysis-and-implications.html
http://www.nakedcapitalism.com/2010/01/fed-secrecy-claims-bogus.html
Clearly this is an arcane world they describe:
So the reason for secrecy may simply be imperial reflex. But it might be to disguise the fact that the Fed is at risk of taking a loss on the Maiden Lane III loans, by showing that its current marks are unrealistic. While a mere $24 billion loan might seem unimportant in the context of a $2 trillion balance sheet, if Maiden Lane III’s valuation look generous, that calls into doubt the loans made to Maiden Lane I (the entity for Bear Stearns toxic waste) and Maiden Lane II (which holds some problematic AIG mortgage exposures). And the Fed is hoovering up such large amounts of paper on its own balance sheet, some of it outside its traditional, very stringent standards for lending, that small percentage losses there can add up to big dollar amounts. As Willem Buiter, former central banker, now chief economist of Citigroup, has pointed out, if the Fed takes enough losses on its forays into risky transactions, it will need to be recapitalized by the Treasury, meaning in the end by taxpayers.
January 25th, 2010 at 11:13 pm
News of tonight…Bloomberg says he will have to layoff 10,000…Hang Seng getting pummelled again…now down 10% in 2 weeks. The clock is ticking on the bulls…the train may have left the station. Apple can’t help you…3.67 vs. 3.50 estimate…that’s like a company with .35 estimate beating by a whopping 1.7 cents.
January 25th, 2010 at 11:42 pm
There is something that I really don’t understand about this whole AIG thing..
Why couldn’t we have just let them go into bankruptcy?
Can’t the bankruptcy court enforce & negate contracts for AIG. They could have still received government funding (i.e. GM & Chrysler) . If the court found reason to enforce the counter-party insurance contract, then so be it.
But, all this nonsense just seems to smoky, backroom politics.
So why couldn’t they have just filed bankruptcy and then work through it?
January 25th, 2010 at 11:43 pm
http://market-ticker.org/archives/1903-NUCLEAR-Did-Goldman-Offer-To-Tear-Up-AIG-CDS.html
January 25th, 2010 at 11:49 pm
Where is the link to these emails?
I want to see and read them.
January 26th, 2010 at 12:24 am
To me, this is the reason the bonuses this year were such a slap across the face to taxpayers and the government alike. We paid out full to all the AIG’s counterparties to recapitalize them; it’s been an open secret for some time now. All we didn’t know was how much the government didn’t want us to know who/how much got paid.
It was a payment that should have been a loan but the fed was afraid to come forward and ask for permission to lend and it allowed the illusion that the banks were healthy at exactly the time they needed to appear so. Or it was just more convenient, which is my guess – it could be accomplished through sheer inertia and lawfulness. The fact that it was taxpayer money was an afterthought. But, lo, we found out, and now we look at the banks and say: hey man – that really isn’t yours and you know it and we know it. And they say: yes it is. And we’re going to spend it, all 24 billion, on us. Now piss off.
If/When the financial sector looks back at the regulations that came down on them and end the fun they may look back at that moment as the peak in hubris, in chutzpah, in balls per square fat banker.
January 26th, 2010 at 12:50 am
A ray of light (or a problem to those who prefer darkness…wonder who those might entail?)
An Investigator Presses to Uncover Bailout Abuse
By MARY WILLIAMS WALSH
Published: January 25, 2010 (NYtimes)
Neil M. Barofsky is not a household name like some special investigators of the past — Kenneth Starr during the Clinton administration or Archibald Cox in the Watergate years.
But increasingly, Mr. Barofsky is setting off fireworks on Capitol Hill as he quietly and methodically pieces together the most complete historical record yet of the financial bailout. His reports are careful but not cautious, showing a willingness to stand up to some of the most powerful people and institutions in Washington or on Wall Street. [cont]
http://www.nytimes.com/2010/01/26/business/26tarp.html?hp
January 26th, 2010 at 1:13 am
This could be problematic for the senate. If they vote for Bernanke then he could be the first Fed chairman to resign in shame if something more damaging comes out. Do they want to hang that albatross around their necks come election time? At least it is change I can believe in
January 26th, 2010 at 2:52 am
[...] NY Fed emails about AIG coverup [...]
January 26th, 2010 at 6:09 am
Barry, Another request to post a link to these docs. (I can’t find them on Towns’ committee’s website.)
January 26th, 2010 at 7:30 am
@brad.walker
Start with the players at Goldman Sucks, the NYFED, Treasury. ALL of them Paulson, Geithner, Blankfein, Bernanke.
After that just turn on your collusion-detecting radar. Realize how much power, or the abuse of it these people are capable to enrich only their Tribe.
If you can’t figure it out from there, you may need to amp your cynicism just a bit.
January 26th, 2010 at 7:57 am
- it might be to disguise the fact that the Fed is at risk of taking a loss on the Maiden Lane III loans, by showing that its current marks are unrealistic.
I remember BBB blithely commenting that the FED was adequately protected by the collateral they received! Remember, you never lose money on real estate! Remember those news stories about the Fed popping up as part owner of foreclosed properties like strip malls in Wichita etc (no disrespect to Wichita!)
January 26th, 2010 at 8:45 am
Can you provide a link to the report or a contact where we can request a copy? It’s not coming up in my searches at the 111th Congress Committee on Oversight and Gov’t Reform web site.
Public Disclosure As A Last Resort: How the Federal Reserve Fought to Cover Up
the Details of the AIG Counterparties Bailout From the American People
Special Report
U.S. House of Representatives , 111th Congress
Committee on Oversight and Government Reform
January 25, 2010
January 26th, 2010 at 9:10 am
“Bankruptcy” is just a recipe for a big crisis, and huge opportunity for fraud, lawyers fees, and drags out for years. See – LEHMAN.
TransorZ – Your stuff on Maiden Lane I, II, III is highly ill-informed. The Fed keeps close track on this stuff and has repeatedly said… “it looks like we will take zero losses on any single pool of toxic assets”, “it looks like as a whole our committments to toxic asset purchases were properly haircut, and will end up being profitable for the Fed”.
Bernanke himself said this before congress. If you watch credit asset prices at all, they have recovered even stronger than the stock market. The “crisis” caused by Lehman’s bankruptcy was just a moment of silly fear that now appears past. The fundamentals did not, and do not seem to warrant anything close to the 50/100 discounting that went on 1-yr ago. Prices are back to 80-90/100… and most credit bonds look likely to pay in full.
That alone should help explain why an “AIG bankruptcy” was a bad idea.
January 27th, 2010 at 6:32 am
Read this again just now… there is nothing here that is “scary” or “dubious”.
Did the taxpayer and AIG overpay for these CDS contracts in crisis – yes! But that is simply because they were overexposed and basically had too big a collateral/margin call in the downturn. Thats what happens with leverage.
It is clear from these docs, that ML III will not lose taxpayer money… but it did wipe out AIG collateral and associated equity. Thats the point! That is the whole reason the govt is involved.
The “couterparties” who were in these transactions had offsetting transactions on the other side. The unwound their transactions (or some of them) at the same time as AIG/NY Fed unwound this with them. So while they rec’v $20B here… they pay out $18B on the other side. They are middlemen… thats what they do.
If AIG does not wind down in Oct/Nov 2008… they dont wind down the other side. So the structures recover $15B over the next 12 months… but the transactions on the other side also recover $15B. The point is AIG/NY Fed WANTED TO UNWIND. AIG let it self become OVEREXPOSED and thus found it self in trouble and unwinding at an ADVERSE TIME. So what? That how financial transactions works.
So the govt wants to assist with orderly unwind… and then gets its money back if the market recovers?
Sad, bc its so stupid.