Home > News > Oh My: Geithner Told AIG to Lie to Public About "Backdoor Bailout" of Big Banks and Investment Houses Through AIG

Oh My: Geithner Told AIG to Lie to Public About "Backdoor Bailout" of Big Banks and Investment Houses Through AIG

Oh, WOW.  This one will be big!

The government was trying to bail out AIG, to keep the mega-insurer from going down, which could (maybe) bring down the financial system for a year or two.

AIG was loaded up with obligations it could not possibly meet. It had insured all those subprime mortgages, figuring that only a fraction of them could go bust at any particular time, which was a gross miscalculation, as it turns out.

They also had a lot of credit-default swaps, which, I’m not going to lie to you, I don’t know really what they are. Except you don’t want to have a lot of those on your books as the system comes crashing down.

So here is the malfeasance: AIG paid other banks 100 cents on the dollar — that is, full freight — for their own credit default swaps, which were now either worthless or worth pennies on the dollar.

Why would AIG do this? Why would it put out good, hard cash to get back virtually worthless paper? And why in the hell would you want to saddle a company which was already insolvent with even more insolvency-creating bad paper? All the while pumping its cash (cash from the government, of course) right out the door?

Well, the government — or more specifically, Tim Geithner — seems to have instructed them to do so as a requirement for continuing government assistance. And he instructed them not to disclose such 100-cents-on-the-dollar swaps to the public.

Oh My: Geithner Told AIG to Lie to Public About "Backdoor Bailout" of Big Banks and Investment Houses Through AIG

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