Geithner: ‘Backdoor Bailout’ Was ‘Absolutely’ the Right Thing to Do
Two messages worth noting from Treasury Secretary Tim Geithner’s interview with CNBC yesterday: (1) Although he was the head of the New York Federal Reserve in late 2008, he had nothing to do with the decision to pay $62 billion to Goldman Sachs and others through the AIG bailout. And (2) but it was 100 percent the right decision to make.
CNBC: You still believe it was the right thing to pay counterparties 100 cents for the dollar?
Geithner: Oh, absolutely. Again, the way–this is a tragic failure in the system, and we had no effective legal means to step in and prevent default without doing what you said, helping this firm meet all its legal obligations. That’s why at a centerpiece of the president’s reform proposals is to give the government the tools to unwind, dismember, break up, sell these institutions without the taxpayer being put in the position of having to absorb their losses. That’s the basic–one of the most important reasons why we have to get reform in place.
We had no choice at the time other than to do this. And I’m, personally, very confident it was the right thing to do, and we did it in the best way possible for the American people.
Geithner will testify Jan. 27 before a House oversight panel on his role in those decisions.