By Ian Swanson - 11/18/09 01:22 AM EST
Former Rep. Rob Simmons (R-Conn.) on Tuesday called for Treasury Secretary Tim Geithner to be fired for his “mishandling” of AIG’s bailout.
Simmons, who is challenging Senate Banking Committee Chairman Chris Dodd (D-Conn.) in next year’s election, made the comment in a statement attacking both Dodd and Geithner while reacting to a report by Neil Barofsky, the inspector general of the $700 billion bailout program, known as the Troubled Asset Relief Program (TARP).
The TARP report “is a deeply troubling account of Secretary Geithner’s failed management of the AIG bailout,” Simmons said. “The cozy relationships between the bailed-out financial companies and powerful politicians like Tim Geithner and Chris Dodd are exactly why Americans have lost trust in Washington, D.C., and why we need new leadership with the skills and integrity to clean up their mess and get our economy back on track.”
Barofsky’s report criticized the Federal Reserve Bank of New York, which Geithner led during the bailout, for a series of missteps that Barofsky said ended up requiring the government to provide additional support to AIG.
More than $180 billion in federal funds have been committed to AIG, which was at the center of the financial crisis. The insurer was crippled by poor investments and trades in credit default swaps, one form of financial derivative. Much of the investment in AIG went out the door to other financial institutions owed billions by the insurer.
Geithner got off to a rocky start as Treasury secretary and continues to be a piñata for the political left and right for his ties to Wall Street.
Still, under his stewardship at Treasury, the financial markets have steadied and banks appear to have moved on from the worst of the crisis. His decision to do “stress tests” on the banking system is widely credited as a success that built confidence in the financial system and has helped the Dow Jones move above 10,000.
On the other hand, some voices worry that the unprecedented federal intervention in the financial sector is creating a bubble that is driving up stocks.
The Barofsky report represented a major hit on Geithner, since it was particularly critical of the New York Fed. But Simmons on Tuesday appeared to be the only candidate or officeholder to call for Geithner to resign in response to the report.
Impact on Dodd
A recent poll had Simmons in front of Dodd by more than 10 percentage points, and AIG is seen as a point of vulnerability.
Dodd was criticized earlier this year for supporting language that allowed AIG employees to keep bonuses that were promised as part of contracts signed before Feb. 11, 2009. Dodd has said he did not know about the AIG bonuses at the time, and that Obama administration officials had asked for the language, which was included in the $787 billion stimulus bill.
Dodd has worked hard to show his independence from Wall Street.
He introduced sweeping financial regulatory reform legislation last week that has provoked opposition from most of the financial sector. It also appears to put him at odds with the Federal Reserve and Geithner, who had proposed less drastic changes to the regulatory framework in response to last year’s financial crisis.