Legal bribery: Tim Geithner earns $400,000 for 3 speeches on Thank You Street

Ex–Obama Treasury Secretary and former official with the New York Fed, Tim Geithner, has arrived on Thank You Street.

Geithner’s share of the legal DC bribery — $400,000 for just three speeches, with more to certainly come.

Matt Berman at National Journal (my emphasis):

Former Treasury Secretary Tim Geithner Is Finally Getting Paid By Big Banks

During his tenure as Treasury secretary, Timothy Geithner was constantly dogged by the belief that he was spawned from Wall Street. This thinking was false: If you need a refresher, Geithner had actually spent most of his career in government, and none of it at a bank. When he left office this year, Geithner said that it would be “extremely unlikely” for that to change.

tim-geithner__342px-Timothy_Geithner_official_portrait

Timothy Geithner

But as it turns out, Geithner is now being paid hundreds of thousands of dollars by massive financial organizations. It’s just that he isn’t being paid to work on Wall Street; he’s just being paid to talk every now and then.

The Financial Times reports that Geithner, like countless former public servants before him, has hit the highly lucrative speaking circuit. He’s already made about $400,000 in just three engagements. And that tab is being footed by financial institutions such as Deutsche Bank and Blackstone, which paid him about $200,000 and up to $100,000, respectively.

There’s more at the link, but that much should hold you for now.

Geithner is the model for legal bribery in DC

This is the way our legal bribery system works for non-Congressional types like Geithner. For Congressional types, the pay is upfront. For non-Congressional types — like Bill Clinton — the pay comes after all services are rendered and the perp is safely out of “legal” quid-pro-quo territory.

The appearance of quid-pro-quo is nevertheless screamingly obvious. Here, for example, are our comments on Bill Clinton’s millions:

[K]eep in mind that Obama has a payday waiting as well. Bill Clinton is now worth $80 million and counting, and makes up to $500,000 per speech. A taste of how that works (my emphasis and paragraphing):

On December 21, 2000, President Bill Clinton signed a bill called the Commodities Futures Modernization Act. This law ensured that derivatives could not be regulated, setting the stage for the financial crisis.

Just two months later, on February 5, 2001, Clinton received  $125,000 from Morgan Stanley, in the form of a payment for a speech Clinton gave for the company in New York City.  A few weeks later, Credit Suisse also hired Clinton for a speech, at a $125,000 speaking fee, also in New York.  It turns out, Bill Clinton could make a lot of money, for not very much work.

They don’t call him the Big Dog for nothing. Quid pro quo? You decide. Either way, Obama’s lining up a ton of quid on the credit side of his ledger, for whatever quo awaits.

The inner link is to Matt Stoller’s great piece on Bill Clinton’s $80 million post-electoral payday. A must-read if you’re looking for must-reads.

What Tim Geithner did

What did Tim Geithner do to earn this delayed first-installment thank-you check?

Many things, but the first that hit our radar was this: Geithner, as president of the New York Fed, helped arrange for AIG, which owed $62 billion or more to the likes of Goldman Sachs, to get 100 cents on the dollar for every dollar it owed, so that the likes of Goldman Sachs (and Bank of America, Merrill Lynch, Citigroup, Société Générale, Deutsche Bank) would not see one dime of loss on the “insurance” money owed them by bailed-out AIG.

In other words, AIG owed a ton of money to the banks named above because it sold them “insurance” (in the form of Credit Default Swaps, a kind of derivative) to protect Goldman Sachs et al from losing billions on their own mortgage-backed derivatives. The mortgage-backed derivative market collapsed in 2007–2008, and AIG, as the insurer, was on the hook for at least $62 billion in reimbursement to those banks.

AIG was collapsing. Without AIG’s money, the banks were likely collapsing as well. AIG, which didn’t have a fraction of what it needed in reserve (remember, thanks to Bill Clinton, derivatives were an unregulated, ruleless market), was instantly bankrupt and needed a taxpayer-financed bailout to survive.

How much of a bailout would AIG get? It fell to the likes of NY Fed president Tim Geithner and others to negotiate that. If Goldman Sachs et al could be induced (or forced) to accept a “haircut” (partial payment in lieu of payment in full), that taxpayer-financed number would be smaller. Instead, Geithner and his ilk argued for, and got, a full taxpayer-financed payout to AIG, which passed the money immediately to Goldman et al. Goldman and its fellow banks must have been ever so grateful.

The Nation:

Treasury Secretary Timothy Geithner was summoned to testify before the House Committee on Oversight and Government Reform yesterday in order to answer two questions: why did he sign off on AIG paying the big banks full value on insurance for bad assets like mortgage-backed securities–using $62 billion in taxpayer money–at a moment when everyone else was taking losses? And what was his role in the decision not to disclose to the public–which owned 80 percent of AIG at the time–the names of the banks and the payments they received, as AIG was prepared to do before the Federal Reserve Bank of New York (FRBNY) run by Geithner advised them not to? …

Geithner argued that the New York Fed was operating under a gun. In November 2008, credit rating agencies–the same ones that gave mortgage-backed securities their highest AAA rating–were about to screw us again by downgrading AIG’s credit rating when taxpayers had already handed the company an $85 billion bailout in September. A downgrade would require AIG to pay out tens of billions of dollars more in collateral payments to the banks on the credit default swaps (insurance on the bad assets)–money that it didn’t have and that Geithner maintained would force the company to collapse. …

How was it Goldman and the other firms got such a sweet deal on this backdoor bailout via AIG?

“The money going into AIG is going right out to the counterparties,” said [Democratic Congressman Stephen Lynch of Massachusetts]. “This is a pass-through. And the folks on the other side are Goldman Sachs–that’s a principal beneficiary. And we don’t negotiate a nickel–not a nickel, not a cent–off of what they’re getting. … You had every opportunity–every opportunity to weigh in on behalf of the American people and make these people take a new deal, make them take a haircut. You scalped the folks at Bear Stearns–two cents on a dollar, they got. The folks at Goldman Sachs got a hundred cents on a dollar. That is just unacceptable. Totally unacceptable.”

Of course the banks could have been forced to accept a haircut — so long as the government had asked the question the right way. That right way would be: “How much of a government bailout would you like, none or what we offer?” But Geithner decided they needed it all. (There’s even a story that the banks were willing to take less than full reimbursement, but were talked out of it by the Geithner negotiating team; I can’t find the link, however.)

Remember, the bailout of AIG was really a back-door bailout of Goldman and ilk, who would also have gone under according to Geithner (see the full version of the first quote above). That’s what all that talk of “preventing a full collapse of the banking system” was about. The Big Boy banks had lost their collective butt, and Geithner had handed it back to them, for free. Now Geithner is getting his reward — on Thank-You Street.

And your reward for giving them their reward?

So that’s the way it works in the world of Your Betters. But don’t feel forgotten. As a thank-you to you for allowing Your Betters to succeed so nicely, they offer you this small token:

ClassWarKitteh_catfood

Class War Kitteh says — Enjoy your trickle-down, guys ‘n’ gals. It’s the least they could do. Literally.

GP

To follow or send links: @Gaius_Publius


Gaius Publius is a professional writer living on the West Coast of the United States. Click here for more. Follow him on Twitter @Gaius_Publius and Facebook.

Share This Post

  • Kim_Kaufman

    “That is just unacceptable. Totally unacceptable.” Yeah, right.

  • williambanzai7

    I wonder if Albert Einstein commanded honorariums like that.

  • EdA

    I hope that Timmy remembers to pay taxes on his bribes.

  • masaccio68

    The architect of the end of Glass-Steagall collected the same way.

    http://firedoglake.com/2009/04/03/summers-feeds-at-hedge-fund-trough/

    Larry Summers was paid $5.2mn by the hedge fund that employed him, D.E. Shaw, according to the Wall Street Journal. That isn’t all the cash showered on him either. Here are some of his $2.77mn in speaking fees: JP Morgan ($67.5K), Skagen Funds ($180K), Citigroup ($99K), Goldman Sachs ($202.5K), Lehman Bros. ($67.5K), CEO 100 ($45K), Price Waterhouse Coopers ($67.5K), State Street Corporation ($112.5K) McKinsey and Co. ($135K), Merrill Lynch ($45K, donated to charity).

    Apparently, Larry can’t quite live on the miserly $587K he got as salary from Harvard.

  • http://www.americablog.com/ Naja pallida

    Arming himself with the sidewalk, he became an imminent threat!

  • emma852

    as Heather replied I’m amazed that a stay at home mom can make $5905 in 1 month on the computer. did you see this page w­w­w.K­E­P­2.c­o­m

  • http://adgitadiaries.com/ karmanot

    Yep, Travon Martin caused his own murder—-the new standard of justice in the empire has been established.

  • nicho

    Exactly. Remember that everything Hitler did was “legal.”

  • nicho

    reality shows, amateur performance competitions, and high-profile crime trials.

    In other words, cable news.

  • http://www.rebeccamorn.com/mind BeccaM

    The plundering has been made entirely legal and won’t stop until the American people have said they’ve had enough.

    Unfortunately, most of ‘em are glued to their TV sets, watching reality shows, amateur performance competitions, and high-profile crime trials.

  • cole3244

    they are the mafia on steroids.

  • http://parkandbark.wordpress.com/ Houndentenor

    I don’t know who came up with the phrase “crime doesn’t pay” but they obviously weren’t referring to the white collar kind.

  • Indigo

    That’s likely but, of course, there’s inflation to take into account. Last decade’s billion dollars won’t buy much power in this decade and even less in the coming decade. It’ll buy nice things, true enough, but that’s not power.

  • Indigo

    It’s not the Mafia, not the real one, anyhow. This is the actual rulers, the official corporate offices at work. You can call them organized crime, if you like, but that begs the question. Mafiosi are an entirely separate form of organized crime. You see, the coporate offices get to write the laws and that done, there’s nothing cirminal about what they do. Mafiosi do not get to write the laws. Citizens get screwed either way, but with corporate rules, it’s legal.

  • nicho

    How do you think Chelsea Clinton was able to snap up a $10.5-million “fixer upper” condo in NYC? Surely, not out of her allowance.

  • cole3244

    the mafia is now in charge of america and raiding the resources everyday in the name of freedom.

  • cambridgemac

    At $600 million, I think Clinton is well on his way. And I would guess that Bush, Sr, through his Carylisle connection is close to the billionaire mark, too.

  • BrianG

    I predict that Barack Obama will become our first billion dollar ex-president, The man can speechify and the POTUS is the “Big Dog” not the Treasury Secretary. Besides he’ll have Big Oil and Big Insurance thanking him besides Wall St.

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