(Bloomberg) — The failure in 2008 of American International Group Inc., the world's biggest insurer, would have caused “mass panic on a global scale,” Timothy Geithner, the head of the Federal Reserve Bank of New York at the time, testified at a trial over the government bailout of the company.
Geithner, one of three architects of the U.S. response to the 2008 financial crisis, testified in response to claims by Maurice “Hank” Greenberg's Starr International Co. that the government illegally took equity in AIG. Geithner was responsible for setting what a Starr lawyer called “an extortion rate” of 14% on an $85 billion loan to AIG.
In contrast with his predecessor at treasury, Henry Paulson, who testified yesterday and finished well ahead of schedule with short, direct answers, such as “you betcha,” Geithner has so far been more cautious, frequently telling Starr's lawyer David Boies that he didn't remember details of AIG's rescue effort.
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