Wednesday was a difficult day for The American Independent News Network, which is the larger entity that operates The Iowa Independent. Our chief executive and founder announced two of our sister sites would close and their content would be moved to The American Independent.
A recently introduced bill could have far-reaching impact on the U.S. sugar industry, including American Crystal Sugar, a farmer-owned cooperative that locked out 1,300 Midwest workers on Aug. 1.
The chairman for Herman Cain’s Iowa effort says the campaign “relied more on the word of farmers than Washington regulators” in deciding to run an ad containing claims the Environmental Protection Agency says are false.
The Iowa Senate will remain under the control of a slim 26-25 Democratic majority when it reconvenes in January 2012.
The latest political clamor over AIG, poised to combust next Wednesday at a House hearing on backdoor payments to banks that made risky deals with the company, centers on the Federal Reserve’s effort to conceal details of those payments. But senior officials, including Treasury Secretary Timothy Geithner, have so far evaded a key question: Why were AIG’s trading partners fully paid with taxpayer money instead of being told to take a loss?
Treasury Secretary Timothy Geithner (WDCpix)
“They chose to pay some people off entirely,” Bill Black, an economics and law professor at the University of Missouri and a leading critic of the government’s bailout managers, said in an interview. “They have never given a coherent explanation of why those particular folks. Under their own logic, there was no reason to pay off these parties at 100 cents on the dollar.”
Geithner, who led the New York Fed when it orchestrated the $62.1 billion payout to 16 banks that held AIG’s credit default swaps, has been asked to explain that controversial decision numerous times over the past year. And his answers have varied, depending on the questioner, causing Black and other critics to wonder whether the nation’s financial regulators can be counted on to spot the next economic crisis.
In November, bailout inspector general Neil Barofsky quoted Geithner as stating that AIG’s bank counterparties — including Goldman Sachs, Merrill Lynch and 10 foreign firms — were not at direct risk if the troubled company defaulted on its debts. “The direct effects of that failure would not have been particularly significant,” Geithner reaffirmed last month during testimony on Capitol Hill.
In May, however, Geithner suggested that AIG could not have negotiated lower payments to its trading partners without endangering the health of the whole financial system.
“We have no option now to selectively diminish the value of those claims without taking risks that you would have a default,” he told Sen. Chris Dodd, D-Conn. Rep. Jo Ann Emerson, R-Mo., was told that “you can’t selectively allow the institutions to default on particular types of creditors without risk that the whole thing comes unwound.”
So which explanation is true: Were AIG’s creditors hedged against the risk of a default — as Goldman has argued — or not? And if the banks had already mitigated the risk of losing their deals with AIG, why didn’t that allow Geithner’s Fed to negotiate a cut in repayments?
“There’s no way to prove it and no way to know,” former New York governor Eliot Spitzer, who took on Wall Street as the state’s attorney general, told The Washington Independent. “It’s part and parcel of the willingness of the Fed and Treasury to obscure from public view transactions involving tens of billions of dollars.”
Spitzer, who co-wrote a New York Times op-ed with Black calling for the public release of all AIG emails, said the Fed’s inability to intelligibly explain its actions cast doubt on the central bank’s fitness to lead the monitoring of systemic risk — as envisioned in the House-passed financial reform bill.
“Maybe [that power] should go to the Treasury, maybe it should go to the New York State attorney general,” Spitzer quipped. “But certainly, the Fed hasn’t done very well.”
Read more at The Iowa Independent’s sister site, The Washington Independent.
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