Geithner’s backdoor bailout

A new report from the TARP inspector general details how Tim Geithner dropped the ball in negotiations with AIG counterparties after the insurance giant’s collapse.

As New York Fed president, Geithner had considerable power to force counterparties like Goldman Sachs to take losses on their swaps with AIG, but didn’t.  As a result, taxpayer money was essentially passed through to banks like Goldman Sachs (now preparing to pay out record bonuses).

From the Huffington Post (How can Geithner survive this?) to Market Insider (Report: Geithner was a complete pushover when it came to AIG), the reaction in the blogosphere has been fairly uniform:  this is an outrage, Geithner is a Wall Street lapdog.  Naked Capitalism’s Yves Smith has a scathing take on the report itself:  it didn’t go nearly far enough in criticizing/investigating Geithner & co.

But there are exceptions.  One of the more amusing reactions comes from Megan McArdle at the Atlantic.  The title of the post says it all:  Watchdog: Geithner Tried to Negotiate With AIG Counterparties.

He tried!  McArdle goes on to argue tht Geithner would have “abused his regulatory authority” by taking a hardline negotiating stance with the banks — with no trace of irony.