In September 2008 the Federal Reserve Bank of New York, a privately owned entity, paid $182 million to buy 80% of the busted insurance firm AIG.
Why would any privately owned company pay par value for the shares of a company that had only hours to live?
That’s what the court wants to know. Why? Because — you’ll love this — the former CEO of the almost busted insurance company says he was cheated. The value of his stock was diluted. How? By all that money. All that money let an outside agency — the New York FED — buy 80% of his worthless shares. He wants payback.
From whom? “The U.S. government.”
But wait! Isn’t the New York FED privately owned? “Yes.” By whom? “None of your business.”
Then why is Bernanke being forced to testify under oath? “Because he was the top man at the Federal Reserve?” But the Federal Reserve is part of the government. What does this have to do with a privately owned bank in New York? “Don’t ask.”
Why did the New York FED pay face value for the shares? Because AIG owed billions of dollars to major New York banks. These banks had been imprudent. They had paid AIG lots of money for insurance on certain obscure financial transactions that AIG did not understand and could not cover, which was why it faced bankruptcy. So, the New York FED counterfeited $182 billion — which it is allowed to do by law — and bought the shares. Then AIG paid off the New York banks.
Dr. Bernanke now gets to testify under oath as to why he authorized this, if he did authorize it. Did he even understand this?
He will be cross-examined. He will be under oath. This is the first time that he has been cross-examined under oath. He will face an expensive team of attorneys this time. This will not be like dealing with Congress.
I don’t recall any FED chairman being compelled by a court to testify under oath and then be cross-examined by hostile lawyers.
I would sure like to see this on cable TV. But I would settle for YouTube.