May

9

An interesting revelation in an article by Ireland economist Morgan Kelly.  But why Geithner's veto? "Perhaps haircutting the Irish bonds by two-thirds would have made Geitner and the Administration look particularly bad in light of their $160 billion full bailout of AIG in order to make sure Goldman and French counterparties were paid in full":

"The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. [Irish Finance Minister] Lenihan was overjoyed, according to a source who was there, telling the IMF team: "You are Ireland's salvation."

The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner…"Perhaps haircutting the Irish bonds by two-thirds would have made Geitner and the Administration look particularly bad in light of their $160 billion full bailout of AIG in order to make sure Goldman and French counterparties were paid in full.

Full more here.


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