When president of the New York Fed, Timothy “Eddie Haskell” Geithner cut a secret deal on the credit default swaps of AIG.

It appears that AIG had already negotiated haircuts, on the order of 60¢ on the dollar, for the credit default swaps, but then Geithner stepped in, and decided to pay the counter parties, which included, big surprise, that great vampire squid wrapped around the face of humanity,^* Goldman Sachs:

Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

The argument was that some of the counter parties would have gone belly up if Geithner had not overpaid them, but I’m with John Carney of Clusterstock:

No doubt regulators would say that paying full price was necessary. But it was not.

A far better move would have been to transparently bailout firms that needed the additional capital instead of doing it in an under-handed way. Even better would have been to have forced those firms with too much exposure to AIG to seek out new capital in the markets, possibly converting debt to equity and wiping out existing shareholders. Goldman Sachs claims that it didn’t need the AIG bailout bucks to survive–a claim whose truth we’ll never actually know because of the bungled operation of the bailout.

Gee, I wonder why it was never made public?

Timothy Geithner should be fired, hell he should be fired and tarred and feathered.

^*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.