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Tim Geithner Admits Banks (And AIG) Were Bailed Out At Rigged Libor Rates, Costing Taxpayers Billions *video*
Posted by Bill Rummel
One-minute clip from yesterday of Geithner being questioned by Rep. Hensarling regarding the Fed's and Treasury's decision to use an artificially low Libor as the interest rate on hundreds of billions in crisis loans to AIG and other bailed-out banks.
Timothy Geithner claimed on Wednesday that the government
had no choice during the financial crisis but to lend to banks and AIG using an interest rate, Libor, that everybody knew was flawed.
Call it a back-door bailout: By using an artificially low Libor, the government saved the banks and AIG millions, maybe billions — and cost the taxpayers the same amount.
The use of Libor in the bailouts also rubber-stamped that hopelessly manipulated interest rate as a market measure, raising still more questions about just how worried Geithner and other regulators really were about it.
In a House Financial Services Committee hearing on Wednesday, Treasury Secretary Geithner was asked why Treasury and the Fed used the London Interbank Offered Rate as a basis for loans to insurance giant American International Group and to U.S. banks under the Term Asset-Backed Securities Loan Facility — even though Geithner and other regulators had long suspected that Libor was artificially low, as Geithner testified.
"We were in the position of investors around the world," Geithner shrugged. "You have to choose a rate, and we did what everybody did — use the best rate available at the time." …Finish reading>>
