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‘I think it was a terrible decision on your part’

Globe Wire Services / January 28, 2010

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Representative Stephen F. Lynch grilled Treasury Secretary Timothy Geithner on why regulators propped up AIG in the fall of 2008 when they let Bear Stearns fail earlier that year and why they allowed AIG to fully reimburse business partners, such as Goldman Sachs, with what was essentially taxpayer bailout money. Here is an excerpt:

Lynch: “We don’t negotiate a nickel, not a cent, off of what they’re getting. You’re supposed to be negotiating on behalf of the American people. You’re saying, ‘Oh, the regulations were different.’ Let me tell you something: We were changing the rules and regulations every single day. . . . you had every opportunity - every opportunity - to weigh in on behalf of the American people and make these people take a new deal, make them take a haircut. You scalped the folks on Bear Stearns - two cents on a dollar they got, two cents on a dollar! The folks at Goldman Sachs got 100 cents on a dollar. And that is just unacceptable. Totally unacceptable. I think it was a terrible decision on your part. . . . It just stinks to the high heaven what happened here. . . . I think the commitment to Goldman Sachs trumped the commitment to the American people.’’

Geithner: “I respect your opinion. I know you hold those opinions strongly, but I completely disagree. The American taxpayer would not have been better off if the government had made it possible for equity holders in Bear Stearns to get more money. The American taxpayer would not have been better off if we had let AIG default. None of us did anything out of any concern -’’

Lynch (interrupting): “There’s a difference between giving them 100 cents on the dollar and letting them default. This was a new game. . . . And we had the banks at a position where we could have exercised a lot of leverage, and you chose not to do it.’’

Geithner: “I disagree with you . . .’’