Wednesday, July 07, 2010
During the financial crisis of 2008, the Department of the Treasury made an outside contractor, Dan Jester, the “point man” on insurance giant AIG, which was teetering towards collapse. Jester’s participation in the decision-making that led to the bail out of AIG came despite the fact he was a former executive—and at that time investor—in Goldman Sachs, which had billions tied up in AIG.
Jester had worked for future Treasury Secretary Hank Paulson at Goldman Sachs. During the height of the financial panic, between September 14, 2008, and November 26, 2008, Timothy Geithner, then the head of the Federal Reserve Bank of New York (and the current Secretary of the Treasury), spoke with Jester on the phone 103 times.
No Treasury employee would have been allowed to do what Jester did: help make billion-dollar decisions affecting a financial firm that also affected his own personal portfolio. But because Jester was a contractor, federal conflict-of-interest rules did not apply to him.
The decision to rescue AIG wound up benefiting Goldman as well. The Treasury Department paid Goldman nearly $13 billion for the credit-default swaps it held with AIG.
-Noel Brinkerhoff
Treasury’s ‘Point Man’ on AIG Bailout That Benefited Goldman, Owned Goldman Stock (by Karen Weise, ProPublica)
In U.S. Bailout of A.I.G., Forgiveness for Big Banks (by Louise Story, Gretchen Morgenson, New York Times)
Mystery Men of the Financial Crisis (by William D. Cohan, New York Times)
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