Treasury Secretary Timothy Geithner is on Capitol Hill today, facing a barrage of camera-friendly and self-righteous (and justified!) bipartisan posturing from members of the House Committee on Oversight and Government Reform over the AIG bailout. It's been testy.
Everybody is angry that when Geithner was the chairman of the Federal Reserve Bank of New York he a) rolled over and paid out 100% of what AIG owed to a bunch of banks, including $13 billion to Goldman Sachs, instead of negotiating the debt down, and b) seems to have worked very hard to keep it all a secret. Geithner's response is that "in a financial crisis you face a tragic choice," and he couldn't "stand back and watch [AIG] burn." Attempting to negotiate with the banks, he says, would have inexorably led to AIG defaulting on its debt, which would have triggered a catastrophic wave of downgrades and a potential collapse of the entire financial system.
And as for his efforts to keep it secret: While he was indeed the chairman of the New York Fed, he says, he played no role in the attempts to limit disclosure of the pass-through bailout because he "withdrew from involvement in...day-to-day management" of the Fed after Obama announced his intention to nominate him as Treasury Secretary. The decisions about disclosure came after that, so questions about that should be directed elsewhere, he said.
Let's take a look at how that went over with members of the House, shall we?
Here's Rep. John L. Mica (R-Fla.) excoriating Geithner for "lame excuses" and resurrecting old charges about his failure to pay taxes. Geithner responded that he's "not a politician" (zing!) and that he was only trying to clean up the mess that the GOP left him.
Rep. Michael Turner (R-Ohio) tried to turn that remark back on Geithner: "I want to assure you, from your answers today, that you are absolutely a politician." To which Geithner snidely shot back, "Do you mean that as a compliment? I can't tell."
Geithner caught just as much, if not more, flack from Democrats. Rep. Stephen Lynch (D-Mass.) got red in the face as he railed that "the commitment to Goldman Sachs trumped the responsibility...to the American people"; Geithner fidgeted like a 14-year-old at the principal's office before saying with exasperation that if he could have avoided getting yelled at by a bunch of congressman, he would have.
The most devastating moment so far was a lawyerly and direct question from Rep. Marcy Kaptur (D-Ohio), who asked Geithner to document his rather dubious claim that he was out of the loop on the disclosure issue because he'd withdrawn from day-to-day management of the New York Fed: "Can you provide for the record a copy of the recusal agreement that you signed when you were at the New York Fed?" Um, well, you see, it wasn't quite so formal as that, Geithner said—but you can totally ask everyone who was there and they'll back me up!
It's currently Ben Bernanke's turn. He's in trouble.