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Paulson Says AIG Harsh Loan Terms Meant to Send Message

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Former Treasury Secretary Henry Paulson’s testimony that American International Group Inc. received harsher terms than other institutions getting government bailouts in the financial crisis set the stage for today’s examination of a second architect of the rescue.

Timothy Geithner, the head of the Federal Reserve Bank of New York in 2008, was cited in earlier testimony as being responsible for setting what a Starr lawyer called “an extortion rate” of 14 percent. He took the stand this morning in a Washington federal court trial over claims by Maurice “Hank” Greenberg’s Starr International Co. that the government illegally took equity in AIG.