UNITED STATES, Feb 05 — Henry Paulson, the former Treasury Secretary at the time of the Bush presidency, gave a clear reply negating charges made for his involvement in AIG payouts during the height of the foreclosure crisis. He said, “I was not involved in any of the decisions made with respect to those payments, nor was I involved in any of the decisions about AIG’s public disclosure of those payments.” Mr. But the fundamental problem lies not in how we intervened, but in why we needed to intervene” — in essence, because AIG
H
enry Paulson, the former Treasury Secretary at the time of the Bush presidency, gave a clear reply negating charges made for his involvement in AIG payouts during the height of the Foreclosure Crisis. He said, “I was not involved in any of the decisions made with respect to those payments, nor was I involved in any of the decisions about AIG’s public disclosure of those payments.” Mr. Paul was presenting a prepared speech to the House Oversight and Government Reform Committee recently. “Those matters were handled by the Federal Reserve Bank of New York and the Federal Reserve Board. They sought to make appropriate decisions on those matters.”
The document indicated that the present Treasury Secretary, Timothy Geithner, while he was the President of the New York Fed during the latter part of 2008 was also not implicated in these decisions about not coming out in the open with payments that had been made to the banks trading with AIG.
In his prepared statement Paulson reiterated that “the rescue of AIG was necessary.” He also said that Geithner and Bernanke, the chairperson of the Federal Reserve had “acted properly and in the best interests of the country.”
But all are not satisfied. The Special Inspector General of TARP, Neil Barofsky is criticizing the limited efforts that had been made by the New York Feds to parley concessions or “haircuts” from AIG partners. He stated in a prepared noted that New York Federal Reserve, “refused to use its considerable leverage as the regulator of several institutions to compel haircuts.” It seemed to be more in a pro-AIG manner than as a regulator. New York Fed uncomfortably interfered “with the sanctity of the counter parties’ contractual rights with AIG, which entitled them to full par value.”
He also noted that in effect the New York Fed was paying the banks par value “for securities that collectively had a market value, based on the amount of collateral payments, of approximately 48 cents on the dollar.” He said that the value of the securities held by Goldman Sachs was 40 cents on the dollar while those held by UBS were 66 cents – on a high end calculation.
In his testimony Paulson said that he was far from happy with the government bailing out AIG. He said, “Taxpayer money should not have to be spent to save a mismanaged and misguided enterprise. But the fundamental problem lies not in how we intervened, but in why we needed to intervene” — in essence, because AIG. is one of those financial companies that is too big to fail.”
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