We at TPMDC and the TPM mother ship are pretty perplexed about the Treasury Department’s continued insistence on maintaining anonymity for the mysterious “counterparties” whose swaps and contracts with AIG are getting bolstered by the taxpayers.
And we’re not alone: Sens. Ron Wyden (D-OR) and Mark Warner (D-VA) urged the disclosure of AIG’s counterparties yesterday. Today, Sen. Maria Cantwell (D-WA) added her voice to the chorus during an exchange with Treasury Secretary Tim Geithner in the Finance Committee:
CANTWELL: Why hasn’t Treasury come forward and said who are the affected counterparties, the people that are most affected by the collapse, so that we know why we are doing this?
And Geithner’s response was less than illuminating:
This company operates in countries around the world. It’s an enormously important entity in this context and its failure, in the judgment of your government, would’ve caused catastrophic damage to the savings of Americans, to interest rates, to pension values, and you would’ve seen — and I share this judgment — you would’ve seen much greater damage than even we saw with the failure of Lehman.
The biggest effects would’ve been on — not on the direct counterparties to the affiliate of AIG that sold a bunch of credit. The biggest effects and the most troubling effects, like what you saw in Lehman, but I think they would’ve been bigger in this case, would’ve been on broader confidence in the financial system in asset values, in interest rates, and in willingness of people to take risks and exposure to financial institution.
That would have caused much more damage.
“The plan is slowly dripping out and people don’t understand where it’s going,” Cantwell replied. Doesn’t it sound like there are at least three co-sponsors for an effort to shed some sunlight on who’s getting AIG’s bailout money?
Late Update: The chairwoman of the Joint Economic Committee, Rep. Carolyn Maloney (D-NY), is taking it to the next level. In a letter sent today, Maloney reminds Federal Reserve Chairman Ben Bernanke that he agreed last year to inform her about the transactions that involved the central bank guaranteeing credit default swap (CDS) contracts that were written by AIG before its crash. As Maloney put it:
However, to date, your office has not provided that information to me nor, as far as I am aware, to the Financial Services Committee. This letter is to reiterate that request and to ask that the information be provided to me at the Joint Economic Committee and to the Financial Services Committee as soon as possible. As the New York Times editorial said on March 3, 2009 about these very transactions: “The AIG bailouts fail the basic test of transparency: Who ends up with the money?” I agree with the Times that “not knowing is not acceptable.”