AIG-Gate: The World’s Greatest Insurance Heist
By Ellen Brown

Rumor has it that Timothy Geithner is on his way out as Treasury Secretary, due to his involvement in the AIG scandal that is now unraveling in hearings before the House Oversight and Reform Committee. Bob Chapman writes in The International Forecaster:

Each day brings more revelations of efforts of the NY Fed and Goldman Sachs to hide the details of the criminal conspiracy of the AIG bailout. . . . This is a real crisis on the scale of Watergate. Corruption at its finest.

But unlike the perpetrators of the Watergate scandal, who wound up looking at jail time, Geithner evidently has a golden parachute waiting at Goldman Sachs, not coincidentally the largest recipient of the AIG bailout. At least that is the rumor sparked by an article by Caroline Baum on Bloomberg News, titled “Goldman Parachute Awaits Geithner to Ease Fall.” Hank Paulson, Geithner’s predecessor, was CEO of Goldman Sachs before coming to the Treasury. Geithner, who has come up through the ranks of government, could be walking through the revolving door in the other direction.

Geithner has been under the House microscope for the decision of the New York Fed, made while he headed it, to buy out about $30 billion in credit default swaps (over-the-counter derivative insurance contracts) that AIG sold on toxic debt securities. The chief recipients of this payout were Goldman Sachs, Merrill Lynch, Societe Generale and Deutsche Bank. Goldman got $13 billion, roughly equivalent to its bonus pool for the first 9 months of 2009. Critics are calling the New York Fed’s decision a back-door bailout for the banks, which received 100 cents on the dollar <> for contracts that would have been worth far less had AIG been put through bankruptcy proceedings in the ordinary way. In a Bloomberg article provocatively titled “Secret Banking Cabal Emerges from AIG Shadows,” David Reilly writes:

[T]he New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve. This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank.

The beneficiaries of the New York Fed’s largesse got paid in full although they had agreed to take much less. In a November 2009 article titled “It’s Time to Fire Tim Geithner,” Dylan Ratigan wrote:

Last November . . . New York Federal Reserve Governor Tim Geithner decided to deliver 100 cents on the dollar, in secret no less, to pay off the counter parties to the world’s largest (and still un-investigated) insurance fraud — AIG. This full payoff with taxpayer dollars was carried out by Geithner after AIG’s bank customers, such as Goldman Sachs, Deutsche Bank and Societe Generale, had already previously agreed to taking as little as 40 cents on the dollar. Even after the GM autoworkers, bondholders and vendors all received a government-enforced haircut on their contracts, he still had the audacity to claim the “sanctity of contracts” in the dealings with these companies like AIG.
Geithner testified that the Fed’s hands were tied and that the bank could not “selectively default on contractual obligations without courting collapse.” But if it was all on the up and up, why all the secrecy? The contention that the Fed had no choice is also belied by a recent holding in the Lehman Brothers bankruptcy, in which New York Bankruptcy Judge James Peck set aside the same type of investment contracts that Secretaries Paulson and Geithner repeatedly swore under oath had to be paid in full in the case of AIG. The judge declared that clauses in those contracts subordinating other claims to the holders’ claims were null and void in bankruptcy.

“And notice,” comments bank analyst Chris Whalen, “that the world has not ended when the holders of [derivative] contracts are treated like everyone else.” He calls the AIG bailout “a hideous political contrivance that ranks with the great acts of political corruption and thievery in the history of the United States.”

If you tell a lie big enough and keep repeating it, said Joseph Goebbels, people will eventually come to believe it. The bailout of Wall Street initiated in September 2008 was premised on the dire prediction that if major counterparties in the massive edifice of derivative contracts were allowed to fall, the whole interlocking house of cards would collapse and take the economy with it. A hijacked Congress dutifully protected the derivatives game with taxpayer money while the real economy proceeded to collapse, the financial sector choosing to put their money into this protected form of speculative betting rather than into the more mundane and risky business <>  of making loans to struggling businesses and homeowners. In the end, $170 billion of federal funds went to AIG and the banks feeding at its trough. Meanwhile, a survey of state finances by the Center on Budget and Policy Priorities think tank found that state governments face a collective $168 billion budget shortfall for fiscal 2010. If the money used to bail out AIG and the banks had been used to bail out the states instead, the states would not be facing insolvency today.

There is no law against gambling, but there is a law against fraud. In Watergate, a special prosecutor was appointed to bring criminal charges; but times seem to have changed.

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include Forbidden Medicine, Nature’s Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health (co-authored with Dr. Richard Hansen). Her websites are <> , <> , and <> .

~ by Eric Harrington on February 10, 2010.

2 Responses to “AIG-Gate: The World’s Greatest Insurance Heist”

  1. Which would you vote to do again?
    1. stimulus bill – not a jobs bill but a democratic payback bill
    2. gm take over – gm had to eventually declare bankruptcy
    3. cash for clunkers – cost 3 times more than original estimate
    4. no real support from other countries in wars
    5. lack of proper vetting
    6. tax cheats in his admin
    7. socialist in his admin
    8. allowing radical racist communist in his admin – van jones
    9. predicted 8% at 9.8%
    10. no olympics for chicago – turned out to be a big ego trip instead
    11. making race relations worse – (stupidly comment- professor gates)
    12. fly over photo op in new york – scared new yorkers
    13. selling out other nations by removing missile defense
    14. constantly campaigning
    15. letting pelosi and reid write bills
    16. allowing lobbyist when he said he wouldn’t
    17. lack of transparency
    18. multiple czars with no accountability
    19. lying about details of his healthcare reform bill – YOU LIE!!!
    20. attempt to take over census
    21. undecided about giving military what they need to win
    22. putting caps on corporate pay
    23. refusal to investigate black panthers
    24. association with acorn
    25. investigating CIA
    26. refuse to honor national day of prayer
    27. worldwide apology tour
    28. willing to bend over to our enemies while giving our allies the shaft
    29. lack of support for israel
    30. supporting a dictator in honduras
    31. took too long to speak out against violence against voters in Iran
    32. closing gitmo without a plan
    33. getting the NEA to produce propaganda art for his agenda
    34. firing inspector general for investigating his friends at americorp
    35. shutting down voucher program in DC for poor school kids
    36. firing the head of gm
    37. lied about putting bills online for 5 days
    38. allowing unions large share in businesses taken over by government
    39. intimidating businessmen (I’m only thing standing between you and the pitch forks)
    40. allowing his admin to threaten shareholders during bankruptcy of car dealers
    41. spending more than any president in history
    42. raised the deficit 3 times the amount it was last year
    43. bailout of fannie and freddie
    44. will not be able to repay tarp money to taxpayers as promised
    45. creating a trade war with china & mexico
    46. devaluing the dollar all over the world because of massive debt & spending
    47. allowing u.s. to become in debt to foreign countries
    48. class warfare uproar over AIG bonuses but silent about bonuses for fanny & freddie

  2. EagleThanks for the link. I went back to the Legislature’s web site and I see they have changed the sttaus from “in committee”, as it was when I last looked at the site, and added a “majority opinion” that was not there then.The New Hampshire bill was the most radical of the attempts at legislation but I still think it is significant that the members of any state legislature would even author language such as was in that bill. Three things stand out to me here. The first is that, according to the articles at that site, over half of the state legislatures in the country have introduced such bills, early on in their first sessions after the elections, and did so with the knowledge that they had an uphill battle to get anything passed. To me, this is only the tip of the iceberg that is the anger building in many people today.Secondly, the large effort the socialists have put into trying to stop even the least of these bills tends to indicate that they are very concerned that this movement be killed as fast, and as thoroughly as possible. They must consider this a very real threat, against which they would have little defense if it were to flourish.The third, and largest concern I have is the reactions to this obvious abuse of power and overreaction to legislatures simply trying to restate one small portion of the Bill of Rights. The fact that the socialists are obviously using their majorities to stop any threat to their control of the country is only going to increase the level of frustration and anger against them. A good example of this is the fact that a respected editor, Dave Nalle, would publish the sentence “It is time to put an end to the politics of partisan greed and the ongoing erosion of our rights by whatever means are necessary.”As many here have mentioned, history repeats when we don’t learn from it. We have reached the point where it has finally become obvious to a large part of the population that our government has been taken over by socialists and they are doing everything they can to insure we can not stop them. The system of checks and balances, originally laid down in our constitution, is almost completely destroyed as the socialists have, effectively, gained control of all three branches.We have seen this pattern before – over and over again; The population has discovered that they are being conquered and are starting to fight back. The despots are responding and, as opposition grows, they will become more and more oppressive until they trigger open violence. We have been fortunate in this country and I don’t think most people really understand how, committed and how utterly vicious these people are. If the truth of their actions ever come out many would face long prison terms and they will kill to keep that from happening.I don’t mean to disparage, or discourage, efforts like the “tea party” or anything similar. The problem, to me, is that most Americans still don’t seem to understand the enemy they are facing. “Grass roots” protests, such as these, have an effect only on people who feel they need to keep “public support”, e.g. politicians who have their own agendas but still believe in the principals of our country and would stand united against any threats to it. The ONLY grass root effort that will make a difference is to remove the offenders by electing Americans in their place – as soon as possible!The leaders of the socialist majority in government are NOT AMERICANS, as we understand the term. They are utterly and completely committed to crushing everything that our country stands for and will use any and all means to do it. Many are members of the “Democratic Progressive Caucus” – a group formed by some of the leaders of the original American Communist Party! If you doubt that, just note that the last presidential candidate from the ACP stepped down saying that the Democratic Party had already adopted all of his party’s principals so he saw no need to run.These people are NOT going to react to our protests in any of the ways we have come to expect our leaders to do. They will ignore – or give lip service to – protests but only as long as they do not see a threat to their power and think that the protests will keep the masses quiet for a while.They have effective control of the media, the education system, all three branches of government and have the states by the gonads because of the economic problems they have deliberately created – for just that purpose. Their recent success in the last elections has convinced them that they have nothing to fear when it comes to being re-elected and they know that there is nothing, within the law, that can stop them. You KNOW what folks like these will, eventually, do.As real Americans, we believe in the rule of law and the limitation of government by such law. These people do not! They USE our laws, twisting and perverting them to their own ends, but will totally ignore them, in their actions, when necessary. America is the greatest society on the planet. No one else has given so much, suffered so much and asked for so little but we are also the most politically naive population in the world! We have been born into freedom, lived in freedom and enjoyed the rewards of that freedom for so long that we have lost sight of the terrible history that forged the beliefs we hold so dear and the absolutely inherent costs of those freedoms.If you really want to understand the cost of freedom just do a little research on what eventually happened to the men who signed the Declaration of Independence. These men signed that document knowing what might (and in many cases did) happen to them. Until we, as a people, acknowledge this commitment and commit ourselves, in equal measure, the socialists WILL continue to win.I’m no prophet, but I believe in the inexorable inertia of history. The next two to four years will tell the story. We will either commit ourselves to the actions necessary to reclaim our government or our children WILL experience anarchy and anarchy has always resulted in only one thing – despotism!

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