Not much of it was anything that we didn’t already know, but his response to the now exposed AIG write-downs that never happened was interesting. Congress seemed to be doing it’s usual interrupt-a-lot act to look tough for voters back home. Here are a few highlights.
1. Paulson said that an AIG collapse would have led to a systemic failure and ultimately 25 percent unemployment.
2. Paulson was indeed questioned about the now revealed AIG haircuts that never came to pass. He denied responsibility for this, saying that the Fed–not Treasury–was responsible for AIG.
3. Paulson said that his original plan for TARP was purchasing troubled assets, but his plan changed to capital injections (what actually happened in practice) as the situation worsened, since he said that purchasing troubled assets would have taken too long in the crisis.
So far, nothing too ground-breaking was mentioned. Given what Paulson said about AIG falling under the Fed’s responsibility, Geithner’s testimony would have been the more important one to see how he would react. Unfortunately I didn’t know what time Geithner was speaking so I missed his testimony (earlier in the morning), so I will try to look it up on YouTube.
UPDATE 11:24 AM: The Wall Street Journal has obtained written reaction from Ben Bernanke to the AIG haircuts that never happened. Bernanke said, “I was not directly involved in the negotiations with the counterparties. These negotiations were handled primarily by the staff of the FRBNY on behalf of the Federal Reserve.” Both Bernanke and Paulson have now pinned the decision on Geithner, who was in charge of the FRBNY. Fall guy?