Can you impeach a Treasury secretary?

What is most amazing to me is how blatant the theft was. Usually they cover theirs tracks better.

How is what Stephen Friedman did not the most blatant, open-and-shut case of Insider Trading imaginable? Yet the SEC goes after a nosey Sri Lankan guy whose firm was capable of gathering information from people working at a few select firms and then trading on that.

Clearly it helps to be politically connected and incredibly wealthy.

Geithner is a dishonest lackey and not to be trusted. It blows my mind, the kind of garbage these people have perpetrated. These people need to be in jail.

This bailout everybody program is terrible. The point of capitalism isn't just profits. It's losses to keep the idiots in check.

Can we subpeona Geithner's copies of TurboTax? It would be interesting to see the fields that he has manually overridden.

"The Federal Reserve Bank of New York... opened an $85 billion credit line for New York-based AIG. That bought it 77.9 percent of AIG and effective control of the insurer.

The government’s commitment to AIG through credit facilities and investments would eventually add up to $182.3 billion."

According to the first sentence, AIG was worth $109 billion. Does the federal government now own 167% of AIG?
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In answer to curious econ student, the rationalizations presented by the fools in the federal government was that we couldn't let the largest insurer of financial institutions fail. They saw it as the equivalent of Lloyd's of London going bankrupt. But, that viewpoint is nonsense. The company obviously had written too many policies with inadequate premiums to cover the risks. If AIG had gone bankrupt, the court would have put it into receivership, and experts would have been hired to assess the situation. The outcome would depend on how much compensation needed to be paid in the short term. If the amount was larger than AIGs assets, then policy holders would get only a fraction of the compensation due to them. Would that cause a chain reaction of financial institution failures that would sink the economy? I don't believe so: most of the financial institutions could have withstood their losses. But, if some of them went bankrupt, the overall outcome would have been better than what we have now: a badly run, undercapitalized insurer that is sucking down billions of taxpayer dollars each week; scores of financial institution CEOs who made bad decisions and felt safe because they insured themselves (at below-cost rates) and see no problems with acting as riskily in the future; and many angry smaller insurers who didn't low-ball policies or mislead regulators, and who had to pay out billions to their clients without any financial relief from Nanny State. To me, the latter is the biggest longterm economic problem: the corporatism of the modern federal government put smaller businesses at tremendous disadvantages. If you cannot (or will not) buy some legislators and some lobbyists, then you cannot compete effectively.

If you cannot (or will not) buy some legislators and some lobbyists, then you cannot compete effectively.

That's the essence of the problem right there. We don't need any more regulations or any more laws or compensation czars, we need the government out of Wall Street and out of the board rooms. There is not market discipline anymore thanks to the culture of bailouts. It's only a matter of time, when the house of cards comes crashing down again. Only this time, will the dollar be strong enough to weather the storm?

I don't know if we know enough to fully judge this. It does make you wonder - but this initial deal was struck days after Lehman filed for bankruptcy, after Fannie and Freddie, after ML. The decision on the haircut a couple weeks later was made at a time when things hadn't substantially improved yet and AIG was not one of the recipients of the initial TARP money. Maybe it stinks - maybe. But without more information to demonstrate why it stinks, I don't think it's that unreasonable for Geithner to want to keep AIG counterparties afloat. The whole fear with AIG was the extent of it's counterparties.

Besides, I'm left wondering if this is the same Russ Roberts that wrote this post: http://cafehayek.com/2009/05/speaking-truth-to-..., or if it's someone hijacking your name. When Cliff Asness, every Obama-skeptic's darling, pushed back on the very suggestion of these haircuts you were right there standing with him. And now you want Geithner impeached for doing exactly what Asness was advocating with Chrysler?

Asness was a great advocate for his clients - I fully agree with that. But the fact is, it was just as reasonable to expect him to take a haircut then as it was to expect AIG's counterparties to take a haircut. Why are you insisting on it in the AIG case and resisting it in the Chrysler case? I don't get the distinction you implicitly make. It SEEMS like you're just advocating haircuts when the administration opposes them or opposing them when the administration advocates them. And that's not to say that the administration has been making good decisions - it hasn't IMO (particularly when it comes to Chrysler and GM). But the only common thread between your position on AIG here and your position on Asness and Chrysler seems to be that you opposed whatever the administration said in both cases. Maybe I'm missing something, and if I am I'd appreciate help in understanding why you think a haircut makes sense here (and is an impeachable offense for neglecting) but was objectionable there.

And I should add - while Geithner's decision making seemed quite credible to me, what this Stephen Friedman guy did was ridiculous. If that's not a conflict of interest, I'm not sure what is.

DK,

You replied to DK. This may prove to be a novelty.

You're wrong Duplicitious Kuehn, Geithner's decision sucked, it was nothing short of criminal. Anytime anyone is using taxpayer's money to do any thing, any damn thing at all, in the interest of justice in must be fully open and disclosed so that all taxpayers know what their servants are doing. Anything less is prima facie evidence of a crime and corruption.

Just one more piece of evidence that government slaps you in the face with your own ineffectiveness and position as a useful idiot.

What taxpayer money, vidyohs? This was a Fed credit line exchanged for equity. They didn't get any taxpayer money until well after all this.

And in your tantrum you seem to have missed the fact that I said expecting to pay the counterparties back less than par was "reasonable".

Professor Roberts,

I'm not much of one for conspiracies, so I'm still trying to understand what the Federal Reserve must have been thinking when they decided it was necessary to pay for the losses that would have been incurred had AIG and other large institutions been allowed to fail.

Can you help me understand their thinking? What's the basis for the belief that the failure of one particular company would have had major consequences for the entire system? What model were they using? What research has been done on this topic?