To what extent were Wall Street’s largest firms willing to sacrifice their own skin to fix the economy they helped topple? Well, not much of one.
During today’s House hearing on AIG’s bailout, a central focus was on why AIG’s counterparties — including giants like Goldman Sachs — were paid in full rather than being asked to take a pay cut, considering the degree of the taxpayer-funded intervention (particularly since no less an authority than Treasury Secretary Tim Geithner has said that those payments were insignificant to the goal of rescuing the larger economy).
Today, Geithner said that officials at the New York Federal Reserve, which Geithner headed at the time, tried to negotiate with those counterparties in an attempt to have them accept less than 100 cents on the dollar.
“Relatively quickly, and not unexpectedly, we discovered that most firms would not, on any condition, provide such a concession,” Geithner said. “One said that it was willing, but only if everybody else would agree to equal concessions on their prices.”
Later in the hearing, Neil Barofsky, special inspector general of the Wall Street bailout, revealed that the one volunteer (of eight counterparties) was UBS, the Zurich-based financial giant. Asked by Rep. Eleanor Holmes Norton (D-D.C.) why UBS might have been willing to make that sacrifice, Barofsky speculated that the firm probably simply recognized that the American taxpayers “had taken the global economy on its back.”
The question is: Why didn’t the other seven firms recognize that as well?