Professor Elam

Wed Jan 13 2010

The latest revelations about communications between Treasury Secretary Geithner and AIG 

Now there are calls for his removal from office if not prosecution for securities law violation. 

We have linked to many articles the last few months about the behind the scenes shenanigans involving the various bailout schemes. But the gist of this is

Hank Paulson was the Treasury Secretary under Bush and a former Goldman Sachs CEO

Paulson picked the number of $700 billion out of the air, and got Congress to vote for it

Geithner had worked with the New York Fed  and was deemed the only person capable of handling the crisis as Obama took office, despite failing to pay income taxes, he was approved

The bailout money was used to cover Credit Default Swaps, guarantees that Goldman investments in various bonds and derivatives, issued by AIG to Goldman. Indeed more money was funneled to AIG for this purpose that Goldman had at risk but it was pretty much the entire captial structure of Goldman. So if AIG had not stood good for those CDS, Goldman might have gone the way of Lehman. Oh by the way, ex CEO of Goldman Hank Paulson made the decision not to save rival Lehman. This has been cited as precipitating the lock up of the entire commercial paper market. 

Meanwhile Mish cites letters and other studies showing that the so called stimulus has not created any jobs and that no one can track whether this is in fact happening.