Never Before Seen Secret Memo On AIG Bailout From Fed's Tarullo To Obama Revealed In Podesta Emails

Tyler Durden's picture

The fall of 2008 was a hectic time, when in the aftermath of the Lehman failure, the entire financial system was on the verge of collapse and only the biggest Fed/taxpayer-backed bailout in history avoided an all out depression. Today, as a result of the latest, 12th Podesta leak, we find that then president-elect Barack Obama was also being intimately briefed with unfolding events.

In a previously never before seen confidential memo, sent on November 9, 2008 from current Fed governor Dan Tarullo addressed to Barack Obama, Tarullo send John Podesta an email in which Tarullo, who at the time was not employed by the Fed and was Professor of Law at Georgetown University Law Center, reveals what Hank Paulson and Ben Bernanke in which Tarullo was told on a "confidential basis that, before the markets open tomorrow morning, they will be announcing a significant restructuring of the AIG bailout package.  They are taking this step in order to avoid what they asserted would be a systemic crisis."

The step in question involved the TARP investment of $40 billion in preferred shares in AIG to avoid a collapse of the failed insurer as a result of an imminent ratings downgrade. "This sum will be used to allow AIG to begin repaying the money it has borrowed from the Fed facility.  They will thereby reduce the amount of debt on AIG’s balance sheet and thus avoid the ratings downgrade.   Until AIG can begin selling assets, however, it will continue to draw on the Fed liquidity facility, just not in the amounts originally provided."

Tarullo tells Obama that "there will likely be some criticism from economic and market observers, because this restructuring has relaxed the terms of financing for AIG without additional taxpayer benefits (in the form of additional warrants, for example)." He adds that "Paulson and Bernanke emphasized that they were not happy about having to do this, and both said that the current approach is the one they would originally have taken in September had the TARP been in place."

While the subsequent details of the revised bailout are familiar, what is not known is the implicit "request" made by Tarullo: that when Obama officially becomes president on January 20, he does not undo the "modification" to the AIG bailout as otherwise the markets would be "unnerved"...

As to our reaction – we surely do not want to unnerve markets by saying anything that would suggest your Treasury Department would undo this modification after January 20.  However, the combination of the questionable terms of the original Fed lending and failure to increase the effective stake of taxpayers as part of this deal means that we should avoid saying anything that would identify us with this move.  Our position is perhaps best framed as regret that it was necessary to make these changes in the September arrangement.

... with the most concerning part of the exchange: "we should avoid saying anything that would identify us with this move."

More optical collusion, all for the sake of preserving market stability? Potential improper, collusive behavior aside, what we would like to know is how Dan Tarullo, who was not a coworker of either Hank Paulson or Ben Bernanke was privy to this information which was shared to him on a "confidential basis" by the then-Treasury Secretary Paulson and then Fed Chair Ben Bernanke, and while we are asking, we wonder what other collusion has taken place between Tarullo and the executive branch off the record?

Finally, in what capacity is Tarullo sharing confidential Treasury and Fed information with the president elect, who in November 2008 was still a private citizen?

As a reminder, Tarullo took office at the Fed on January 28, 2009, one week after Barack Obama was inaugurated.

Here is the full confidential memo released by Tarullo:

CONFIDENTIAL
November 9, 2008

 

MEMORANDUM FOR THE PRESIDENT-ELECT
FROM:    Dan Tarullo
SUBJECT:    Restructuring of AIG Deal

 

I received a call earlier this evening from Secretary Paulson and Chairman Bernanke informing me on a confidential basis that, before the markets open tomorrow morning, they will be announcing a significant restructuring of the AIG bailout package.  They are taking this step in order to avoid what they asserted would be a systemic crisis.

 

They apparently were anticipating a downgrading of AIG’s debt to below investment grade status.  Had this occurred, they believe (reasonably, in my view) that a run on AIG would almost certainly have ensued.  The essentials of the restructuring are that the Treasury will be using the TARP to make a $40 billion investment of preferred stock into AIG.  This sum will be used to allow AIG to begin repaying the money it has borrowed from the Fed facility.  They will thereby reduce the amount of debt on AIG’s balance sheet and thus avoid the ratings downgrade.   Until AIG can begin selling assets, however, it will continue to draw on the Fed liquidity facility, just not in the amounts originally provided.

 

Paulson and Bernanke emphasized that they were not happy about having to do this, and both said that the current approach is the one they would originally have taken in September had the TARP been in place.  There is something to this point, although I observe that some believed (rightly, it turns out) that the terms of the original Fed facility were too onerous.. 

 

There will likely be some criticism from economic and market observers, because this restructuring has relaxed the terms of financing for AIG without additional taxpayer benefits (in the form of additional warrants, for example).  Moreover, although Secretary Paulson emphasized that the terms of the injection of preferred stock were less favorable than those of the initial rounds of investments last month in Citi, Goldman, etc., my understanding is that Treasury will be initially waiving payments of dividends.

 

As to our reaction – we surely do not want to unnerve markets by saying anything that would suggest your Treasury Department would undo this modification after January 20.  However, the combination of the questionable terms of the original Fed lending and failure to increase the effective stake of taxpayers as part of this deal means that we should avoid saying anything that would identify us with this move.  Our position is perhaps best framed as regret that it was necessary to make these changes in the September arrangement.

 

If you would like to discuss this further, my numbers are home (XXX-XXX-XXXX) or cell (XXX-XXX-XXXX)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Looney's picture

 

John PooDuster’s e-mails are the gift that keeps givin’!   ;-)

Looney

American Psycho's picture

like Herpes.  one bombshell after another. 

Haus-Targaryen's picture

If history is a barometer of what is to come, they'll bailout DB before they let someone downgrade it to junk. 

MillionDollarBonus_'s picture

Although the Federal Reserve is independent of government, it has a responsibility to maintain the stability of our economy by any means necessary. In a few limited circumstances such as during the financial crisis of 2007-08, this entails working closely with the President or other government officials. I'm happy that our Federal Reserve and government are flexible enough to collaborate when we need them to. Only right-wingers who are looking for any way to discredit Obama, the Democrats and the Fed will be upset by this.

Send Russia a Message by Electing Hillary This November

hedgeless_horseman's picture

 

Want To Know What The S&P500 Does Next? Just Look At The Fed's Balance Sheet

 

 

In a previously never before seen confidential memo, sent on November 9, 2008 from current Fed governor Dan Tarullo addressed to Barack Obama, Tarullo send John Podesta an email in which Tarullo, who at the time was not employed by the Fed and was Professor of Law at Georgetown University Law Center, reveals what Hank Paulson and Ben Bernanke in which Tarullo was told on a "confidential basis that, before the markets open tomorrow morning, they will be announcing a significant restructuring of the AIG bailout package. 

 

http://www.zerohedge.com/news/2015-04-14/one-chart-proves-obamacare-real...

 

-----------------------------------------

Fri, 09/03/2010 - 11:41 | 

hedgeless_horseman

Fundamental analysis? Earnings? Technical analysis? Charts? We don't have a prayer when Ben has his finger on the button under the [roulette] table.

You can take the ghosts of Graham, Dodd, Edwards, and McGee, as well as every CFA on the planet to manage a portfolio. I'll take one insider at 33 Liberty and my performance will wipe the men's room floor with yours.

Love your spirit, kid. Now get back to class.

Yes We Can. But Lets Not.'s picture

Transparency in Gubmint?

>>> Julian Assange, hacker, brings transparency

>>> Barack Obama, POTUS, brought transparency

PrayingMantis's picture

 

 

... " "we should avoid saying anything that would identify us with this move." "

... in some banana republics, they would be lined up against the wall, then  ... 'apunten, fuego' ... ; problem solved ...

 

... and then the demoncRats have this within their midst ... a classic case of Trojan Horse infiltration by terrorists >>> http://www.liveleak.com/view?i=351_1476878619 or here >>> https://www.youtube.com/watch?v=nKt2zaOrxD8 

nibiru's picture

Unless some big bombshell is going to explode on Clinton's face tonight (thanks to Trump) the election is going to end up being another 4 years of complately organised cartel-like administration.

 

Back in the days mafia had some honorary code of conduct. They were trying to rationalise their actions through it. Here we can see the government doing exactly the same by executive orders, taxation and favours for cronies.

 

If this doesn't make people question their leaders, maybe they deserve this? Maybe they have to feel the pain on their own skin, their children's, loved ones? Maybe this is the only thing that can grab everyone's attention? To open their mind to economics.

 

gratefultraveller's picture

The TNT is there to be taken:

https://www.reddit.com/r/WikiLeaks/comments/587lbg/i_have_been_looking_into_the_san_fransisco/

https://boards.4chan.org/pol/thread/93582614#p93589987

Definitively worth a read - Chronic of "The Day Weaponized Autism beat a Gov Conspiracy", as one user put it.

Mr. Universe's picture

Now, as usual, the political rats are closing ranks inorder to protect the staus quo.

from NBC

"I will not discuss any issue that has become public solely on the basis of Wikileaks," said Rubio in a statement to NBC News. "As our intelligence agencies have said, these leaks are an effort by a foreign government to interfere with our electoral process and I will not indulge it."

WTF? Oh I forgot, the GOP wants Hillary to win.

 

 

toro's picture

Sexual Deviant is a better term. http://bit.ly/1sPfpWk

philipat's picture

Hey Toro, previously known as mofio then santafe then Aristotle of Greece then Gargoyle then bleu then oops then lance-a-lot then most recently Loftie.

You are a serial spammer and a serial pain in the ass. Might I politely suggest that you go fuck yourself? And get a life.

PS. You might have noticed that my attempt to expose you for what you are is always the same. That’s because your Spam is always the same (Using fake links to your BS site which has no connection to your comments, which are deliberately dramatic to encourage people to click on the fake link) so it seems only fair that my exposure of your crap should also always be the same. An eye for an eye.

 

Major Malfunction's picture

Wow -- those redditors doing some serious digging.  But "they" know folks are on to them -- first, David Soloff tweeted "we are Fucked" ( https://twitter.com/davidsoloff/status/780600087265161216 ) ..... before realizing eyes were watching, and private locked-down his twitter account between 12:00am PST -1:00am PST.  Prior to 12:00am midnight, his twitter was public.

This entity behind the Assange pedo op is scrambling.

webmatex's picture

[–]scholaosloensis 778 points 1 day ago 

Guys... Center for American Progress was founded by Podesta.

That's right, if this theory turns out to be true, the guy whose mails got hacked is the guy who founded the organization that has been targeting Assange for a long time now.

That places a tin foil hat on my head. Has Assange known about this for quite a while? Was it not a coincidence that Podesta's emails were leaked (meaning Assange targetted him)?

That is pretty much crazy speculation at this point, but this whole story is just weird beyond belief.

JRobby's picture

They knew Oblivio was going to win beforehand just like they know Hillary is going to.

Just depends on how ugly Hillary "wins" if there will be civil unrest or a coup.

History will reflect................

 

Consuelo's picture

 

 

 

And speaking of 'reflecting'...

 

There could be an outbreak of 'lawlesness', which would be nothing more than a reflection of the current political leadership.   Never know...

tbone654's picture

This is such a "Trojan Horse" being pulled on every Clinton voter...  We at ZH all know it already, but when all the dupe's (dems) figure it out for themselves, as the story goes, it's already too late...  The bright side is that the situation is soooooo... bad, prosecutions must be coming regardless of your opinion on the election.  Being in the white house will just leasten the blow and reduce the jail time...  But it's coming or we don't have any law going forward at all...

BuddyEffed's picture

Anyone else remember the meeting that both McCain and Obama were invited to just before the election where they both came out of saying, yep, were going to support the bailout? I wonder what they were told in that briefing.

fishpoem's picture

Great link! I've seen bits and pieces on Abedin, but this is the first time I've seen it all together. Spooky, spooky shit...but it does make perfectly clear the degree to which "patriotism" has been totally monetized by politicians inside the Beltway. Too bad grunts risking their lives on the ground don't know about this.

Duane Norman's picture

Look at Obama in 2009... his hair is certainly more transparent now that it was then, at least!

I guess being bribed ages you fast

VinceFostersGhost's picture

 

 

 

Quick question.......is Podesta actually the President.......cause it kinda seems like it.

MopWater's picture

That's a legitimate question.

Everything is being run through Podesta...I get that there's a staff in place and el prez can't decide everything, but fuck me if it really doesn't seem like Obama is just a figurehead while everyone else does the work...maybe that's why he can always find time to hit the links 

FinMin's picture

Jarret is closer to being de facto President than Podesta.

Jim Sampson's picture

"Paulson and Bernanke emphasized that they were not happy about having to do this"

 

BULLSHIT!!!

Offthebeach's picture

Speer and Himler emphasize that they were not happy about having to do this.

But they did.

Good tools.

codecode's picture

Maybe she uses gmail too?

11b40's picture

Jarret is tied to Obummer, while Podesta is tied to everything.

JRobby's picture

He should be legitimately tried and convicted of treason then executed.

Nunyadambizness's picture

I've said it for several years now that Obozo is a well-speaking moron.  The man doesn't have the intelligence of my Australian Shepherd, and without the media and a teleprompter covering for him he stutters, fumbles, and basically shows his lack of intelligence overall.  It's no wonder Podesta is writng so many emails.

Cynicles's picture

On the bright side, it is nice you finally figured out that a community organizer from Chi is hardly more than a moronic puppet to speak specific words and make specific actions.

webmatex's picture

As he doesn't take his daily national security briefings seriously that may be true.

LadiesLoveCoolJames's picture

No, but he does wear the black robe and pointy hat at all the shadow gubmint meetings. Secret handshake bitchez!

blue51's picture

Even better, find out who HE reports to.

Consuelo's picture

 

 

The chosen one was never calling the shots from the beginning...

 

He was and remains, a Politically-correct PR front-man distraction, and could care less on top of it.  

 

The prodigious use of the teleprompter, the feet-on-the-desk habit and the golf outings should have told anyone with a discriminating eye, that something was very askew with regard to this 'President' by the first few weeks in office...

Chris Dakota's picture
Chris Dakota (not verified) hedgeless_horseman Oct 19, 2016 10:26 AM

Look who is the VIP guest of Trump tonight.

She will be seated in the front row.

Mother of Benghazi Sean Smith who Hillary lied to.

http://media.breitbart.com/media/2016/10/Pat-Smith-and-Hillary-Clinton-6...

Bay of Pigs's picture

You know, having been mocked and ridiculed the last several years as a "conspiracy theorist", being proven correct, rational and sane is still somewhat bittersweet. May all these evil fuckers reap their just rewards and burn for this.

Thank you bro. Youre one of the good ones here and I knew all this six years ago much like you did.

RAT005's picture

Yes, both of you do very well.  Keep up the good work. 

oncemore's picture

Stop answering. I downvoted you for your answer to mdb. I could not care less, what you answered.

hedgeless_horseman's picture

 

MDB is a creative genius and has my votes for Minister of Propaganda, as well as the votes of my dead relatives and pets.

silverserfer's picture

Only Charles Manson could maintain that level of luanacy for this many years. MDB is a cocktail of sadistic, sociopathic, & cedric the entertainer wearing a proverbial dead carcas of liberal roadkill dancing around us like a court jester flaunting his jiggly bits of 720 degree spun around sarcasm. He has gotten into charachter so deep I  fear there is now way out for him now.  

Cynicles's picture

It that a subtle way of saying you have two ZH IDs...?

Falconsixone's picture

Do they collaborate with you? Tell the truth....

LaurelMaryCecilia's picture

Z-Z-Z-Z-Z-Z  has it stopped talking

Yes We Can. But Lets Not.'s picture

Oh, didn't you get the memo?  MDB is a satirist, so marvelously gifted that his satire is of such remarkable purity as to be entirely devoid of even the slightest hint of the debauchery that is humor.

It is said that his genius is best absorbed from a state of deep, meditative stupor.

Implied Violins's picture

"...his genius is best absorbed from a state of deep, meditative stupor."

Yes, I agree that he drives me to drink. Er, more.