Geithner's Disgrace

The new AIG report reveals how the Treasury secretary—and U.S. taxpayers—were fleeced by Wall Street banks.

By Eliot Spitzer
Posted Monday, Nov. 23, 2009, at 2:57 PM ET

The issue has been festering for months: Why were AIG's counterparties—including Goldman Sachs, JPMorgan Chase, and UBS—paid 100 cents on the dollar when the feds rescued the insurance giant, helping raise the cost of the bailout to nearly $200 billion? A new report issued by Special Inspector General Neil Barofsky now reveals that government officials, notably then-New York Fed President and current Treasury Secretary Timothy Geithner, grievously damaged the nation and capitulated to the very banks they should have been supervising.

Barofsky's report reads like a case study in failed negotiation. The New York Fed didn't have the backbone to stand up to Wall Street, didn't understand its capacity to protect taxpayers, and didn't appreciate that its responsibility was to taxpayers.