Tim Geithner is going to get grilled tomorrow by a House committee. He’s going to be asked whether he tried to cover up key aspects of the AIG bailout. But just in case any committee member is reading DailyKos tonight, I have a couple of additional questions to suggest for the proceedings.
Question #1: During the fire sale of Bear Stearns to JPMorgan in 2008, when you arranged to provide $30 billion in taxpayer funding to seal the deal, did you ever disclose that the CEO of JPMorgan Chase at the time, Jamie Dimon, was ACTUALLY YOUR BOSS AT THE NEW YORK FED?
How could Jamie Dimon, a private banker, be the boss of Timothy Geithner at the New York Fed? It could be because contrary to popular opinion the New York Fed is actually a private bank. In previous diaries on this subject I have pointed out that both the Wiki article on the New York Fed and the Wiki article on the Federal Reserve System both assert that the 12 Federal Reserve banks, including the New York Fed, are PRIVATE. Even so polls revealed that some 12 percent of readers did not believe this simple fact. But as hard as it may be for some to believe, the situation has been clarified by the courts. As a District Court wrote in Lewis v. United States (68 F.2nd 1230 (1982)) in a decision later affirmed by the Court of Appeals:
Federal reserve banks are not federal instrumentalities but are independent, privately owned and locally controlled corporations in light of the fact that direct supervision and control of each bank is exercised by its board of directors.
And at the time of Timothy Geithner’s presidency, one of the three Class A members of the board of directors, elected by the owner banks, was Jamie Dimon, CEO of JPMorgan Chase.
Now we know that Timothy Geithner was acutely sensitive to the perception of insider dealing at the New York Fed. Because a few months later when it came time for the Fed to deal with the Lehman difficulties, Geithner asked Dick Fuld, CEO of Lehman, to resign from the board of the Fed precisely to avoid such appearances.
But what neither Tim Geithner nor Jamie Dimon has ever revealed and WHAT NO OTHER MAJOR MEDIA HAS EVER REVEALED is that Jamie Dimon was on the board of directors of the New York Fed at the time of the Bear Stearns deal, and that as such, he was effectively Tim Geithner’s boss. Ask him about that and whether he views that as a possible conflict of interest.
Question #2: In the weeks leading up to the forced sale of Bear Stearns, did you discuss with anyone the idea of seeking retribution against Bear for its failure to support the bailout of Long Term Capital Management in 1998.
This is another gem not widely reported. Of course Geithner was not at the New York Fed in 1998. He was serving at the time as an understudy to Larry Summers and Bob Rubin at Treasury. But he was a close witness to the events surrounding the collapse of LTCM. The Federal Reserve Bank of New York organized a $3.625 billion bailout by the major creditors “to avoid a wider collapse in the financial markets.” But not all the banks were willing to participate at the level asked. Eleven banks put up the suggested $300 million, two banks put up lesser amounts ($125 and $100 million respectively) and one bank -- BEAR STEARNS – declined to participate. We all know payback is a bitch, but the question for you, Mr. Geithner, is: Was the forced sale of Bear Stearns payback?
I mean these questions only as the tip of the iceberg. To me it appears that while Timothy Geithner was at the Fed he presided over a massive implementation of what Naomi Klein calls the “shock doctrine,” the idea that tremendous disturbances and calamities also offer tremendous opportunities. It appears that while Timothy Geithner was at the Fed he presided over a massive white collar conspiracy to use taxpayer money to bail out the member institutions who actually own the New York Fed rather than using his authority first and foremost to protect taxpayers.