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Holy Trinity Caption Contest: Bernanke, Paulson, Geithner

If anyone's bucket list includes hearing, and seeing, the unholy trinity of Bernanke, Paulson and Geithner whose actions have pretty much doomed America, today is your lucky day, because as part of the lawsuit brought on by former AIG CEO Hank Greenberg, the three legendary statists will field questions from prominent, and very flamboyant, lawyer David Boies. As has been reported previously, Maurice “Hank” Greenberg is challenging the terms of the 2008 bailout for the company he built into a global financial-services powerhouse before being pushed out in 2005. He is not challenging the bailout which prevented AIG from liquidating as a result of selling billions of default protection on worthless companies, and which avoided the all out, and much needed, purge of trillions in bad debt and just as worthless equity.

From the WSJ:

The testimony has the potential to be “exciting...this is the first time they’ve had people at this level in the witness chair,” said John Alan James, a professor at Pace University’s Lubin School of Business and chairman emeritus of its Center for Global Governance, Reporting and Regulation. Mr. James said he expected Mr. Boies to “drill” the witnesses and force them to answer difficult questions. “There’s going to be a major effort [to] get admissions of things that are revealing.”

The effort will fail. Some other details:

Starr’s suit alleges that the government went beyond the Federal Reserve’s legal authority in taking a 79.9% equity stake in New York-based AIG, and in doing so violated shareholders’ constitutional right to just compensation. In the deal, the government demanded the equity stake in exchange for providing an $85 billion emergency loan, which charged a minimum of 12% annual interest and was collateralized.

 

The suit also alleges that the government unlawfully was penalizing AIG, a point Mr. Boies hammered at in his opening statement last Monday. “There is simply no authorization in the statute to give the Federal Reserve the roving permission to try to find people that they want to penalize and then use its lending authority to extract those kinds of penalties,” he said. 

 

The government maintains it acted within the law, with terms aimed at protecting taxpayers from the risk of loss. It says it set stiff terms out of policy concerns, seeking to avoid creating a moral hazard in which other firms might take risks on the assumption they, too, could get easy credit from the Fed, government lawyer Kenneth Dintzer said in his opening statement.

Protecting taxpayers? Avoiding moral hazard? Uhhh... what?

The Starr court filing, for instance, asserts that the government didn’t undertake any investigation or analysis to determine whether AIG or its shareholders should be penalized and, if so, how. It quotes Mr. Geithner as saying in his deposition for the case that the government “had no basis of having any direct knowledge of the nature of the risks they were taking.”

 

The filing indicates Mr. Bernanke also will be used as a source on this point. The depositions remain largely sealed.

Well, Geithner had no knowledge of anything, so that is hardly grounds for a lawsuit.

So in retrospect, the hearing will be a total waste of time because nothing and nobody will be allowed to provide a revisionist perspective on a chain of events that will inevitably end in the biggest market crash in history.

So, to help infuse at least some humor in what is otherwise a very tragic outcome, here is today's caption contest.