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January 24, 2010 (LPAC)—The bad news just seems to be getting worse for both Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke. The House Oversight Committee has now received 250,000 pages of documents from the Fed regarding its role in the bailout of AIG. According to the New York Times, which was leaked some of the documents and Congressional committee staff notes, they prove that Geithner was involved, up to his neck, in the decision to pay AIG's trading partners 100 cents on the dollar for their contracts. The Times reports that Thomas C. Baxter, the chief counsel of the New York Federal Reserve Bank, some at the Fed wanted to discount the contracts, but the banks refused. "We asked for concessions, and they said no," Baxter told Congressional investigators. He also told them that it was Geithner who verbally approved the decision to pay full price to the banks.

Where Bernanke came down on this deal is not reported, but nonetheless, his nomination remains in trouble. Speculation in the media has now turned to who might succeed Bernanke if the Senate rejects him, with Politico focusing on Fed Vice Chairman Donald Kohn, who is likely to become acting chairman if Bernanke is not reconfirmed by Jan. 31. Bernanke's nomination was reported out of the Senate Banking Committee by a 16-7 vote, with Sen. Jeff Merkley (D-Ore.) joining six Republicans in opposition. A tabulation by The Hill, Jan. 22, counts 25 Senators supporting Bernanke and 13 opposed, with the remainder undecided or unknown. The yes column includes Dodd (D-CT), Johnson (D-SD), Reed (D-RI), Schumer (D-NY), Bayh (D-IN), Menendez (D-NJ), Akaka (D-HI), Sherrod Brown (D-OH), Tester (D-MT), Kohl (D-WI), Mark Warner (D-VA), Michael Bennet (D-CO), Corker (R-TN), Johanns (R-NE), Alexander (R-TN), Burr (R-NC), Lugar (R-IN), Collins (R-ME), Reid (D-NV), Landrieu (D-LA), Bingaman (D-NM), Carper (D-DE) and Baucus (D-MT). The no column includes Merkley (D-OR), Shelby (R-AL), Bunning (R-KY), Crapo (R-ID), Vitter (R-LA), Hutchison (R-TX), DeMint (R-SC), Sanders (I-VT), Inhofe (R-AL), Feingold (D-WI), Dorgan (D-ND) and Boxer (D-CA). The Hill notes that a few of the Senators who backed Bernanke in the Banking Committee, all of whom are listed as supporters, could change their vote on the Senate floor, notably including Sherrod Brown (OH) who has left his options open. The problem that Senate Majority Leader Harry Reid has, is that, because of the numerous holds on Bernanke's nomination, he needs 60 votes to proceed to a final vote, and he has to file a cloture motion by Tuesday, Jan. 26, if he is to have a vote before the end of next week, but it's a long way from certain that he has the 60 votes.