Geithner takes lashing from Democrats and Republicans at AIG hearing

Treasury Secretary Timothy Geithner endured a public lashing on Capitol Hill Wednesday, with some of the fiercest criticism coming from Democrats.

While no Democrats called for Geithner to resign, Rep. Stephen Lynch (D-Mass.) slammed the former head of the Federal Reserve Bank of New York for giving taxpayers a raw deal in the bailout of American International Group (AIG).

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“You had every opportunity, every opportunity to weigh in on behalf of the American people and make these people take a new deal,” Lynch said, referring to banks that were bailed out in full because they were business partners with AIG. “I just think it was a terrible decision on your part … It just stinks to high heaven what happened here.”

Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, referred to AIG as a “looted corpse.”

Meanwhile, Republicans seem ready to keep up the attacks on Geithner, with some calling for his resignation.

“We’re not getting the whole story. We’re getting a lame story,” said Rep. John Mica (R-Fla.). “You were either incompetent on the job or were not doing your job and knew what was taking place and tried to conceal it. And I think that’s grounds for your removal.”

Rep. Darrell Issa (Calif.), the ranking Republican on the panel, said he had trouble believing parts of Geithner’s testimony.

“[Geithner] has asserted complete ignorance of the Fed’s efforts to cover up the bailout’s details,” Issa said in opening comments. “Many people, including members of this committee, have a hard time believing that Secretary Geithner entered into an absolute cone of silence.”

President Barack Obama and White House officials have repeatedly said Geithner’s job is safe. And some Democrats who have raised questions about the AIG bailout said Wednesday that decisions made at the height of the bailout were understandable.

Still, the highly anticipated hearing seems unlikely to put an end to criticism of Geithner. Neil Barofsky, the special inspector general overseeing the $700 billion Wall Street bailout, has opened two new investigations into AIG.

Meanwhile, the House Oversight panel has received 250,000 pages of e-mails, phone logs and meeting notes from Treasury and Fed officials.

And lawmakers are growing more anxious about the impact the tough economic climate — particularly the 10 percent unemployment rate — will have on the midterm elections.

Geithner defended the actions of the Fed and Treasury in 2008 as essential in averting another depression. Former Treasury Secretary Henry Paulson said later on Wednesday that unemployment could have spiked to 25 percent if the financial system had not stabilized.

Geithner responded to Mica that he “takes full responsibility” and “great pride” in the judgments he made.

“We did not have the luxury of time,” Geithner said. “We could not engage in protracted negotiations. AIG’s financial position was deteriorating rapidly day by day. The prospect of failure was imminent.”

Geithner said he had no direct role in negotiations at the New York Fed over the level of disclosure related to the $62 billion in payments to the AIG counterparties. Geithner maintained that he was not involved in the direct negotiations of whether to pay the counterparties the full value of the contracts, instead of imposing a “haircut.”

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Geithner said that after he was nominated as Treasury secretary on Nov. 24, 2008, he “withdrew” from daily negotiations at the New York Fed. But Geithner said he never signed a written recusal agreement.

Rep. Dennis Kucinich (D-Ohio) criticized Geithner and Fed officials for taking steps that benefited Wall Street.

“The government gave Goldman Sachs more than Goldman Sachs had any right to expect,” Kucinich said. “If that doesn’t illustrate what the New York Fed was working for, who it was working for, I don’t know what does.”