Timothy Geithner backed away from two of his more provocative assessments of the 2008 bailout of American International Group Inc., in a day of courtroom testimony marked by careful answers and a lack of recollection about the details of the financial rescue he helped oversee.
Bloomberg News reports that Geithner, who headed the Federal Reserve Bank of New York at the time of the bailout, shed little new light on how he set the interest rate for AIG’s rescue loan, a key question in a lawsuit by Maurice 'Hank' Greenberg’s Starr International Co. challenging the terms of the government’s assistance to AIG.
Greenberg claims the bailout terms, including the government taking an 80 percent of the insurer’s stock, cheated AIG shareholders and is seeking $25 billion in damages. Geithner, as the second of three major architects of the bailout to testify in the federal court trial in Washington, was proceeded on the stand by former Treasury Secretary Henry Paulson and will be followed by former Federal Reserve Chairman Ben Bernanke.
Geithner’s testimony covered what Starr lawyer David Boies called 'an extortion rate' of 14 percent on an $85 billion government loan to AIG.
Responding to Boies’s questions, Geithner acknowledged, 'Ultimately I was the one responsible for setting that rate.' He testified that it was modeled in part on a contemplated though never completed private rescue of AIG to be led by JPMorgan Chase and Goldman Sachs Group.
Boies asked Geithner if he ever saw anything in writing describing a rationale for the rate.
'I don’t believe so. We were moving kind of quickly,' Geithner said.
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