A defiant Treasury Secretary Geithner defended the government's bailout of American International Group last year and denied playing any role in withholding information about deals that sent billions of taxpayer dollars to big banks
But his claims drew skepticism from lawmakers.
"The consequences would have been catastrophic," had the government not bailed out AIG , the nation's largest insurer, Geithner told the House Oversight and Government Reform Committee.
Geithner added: "I don't think there was a better alternative available."
Over $180 billion was eventually committed to bail out AIG, an action Geithner and his predecessor, former Treasury Secretary Henry Paulson, staunchly defended as vital to avert a collapse of the stricken insurer that would have caused a much broader economic downturn.
But lawmakers clearly remained unhappy and, as the hearing opened, committee Chairman Edolphus Towns, a New York Democrat, vividly described why the AIG bailout made taxpayers see red.
"In effect, the taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street came by and looted the corpse,'' Towns said.
The committee also focused on whether Geithner was directly involved in decisions not to disclose details of $62 billion in payments to banks that held AIG credit default swaps.
Geithner, who was president of the New York Fed, said he stopped having day-to-day involvement in AIG in November 2008, when President Obama nominated him to take over at the Treasury.
"I withdrew from monetary policy decisions...and day to day management of the New York Fed," Geithner told a congressional panel. "I played no role in those decisions."
But his claims drew skepticism from members of the House Committee on Oversight and Government Reform.
"Many people, including people of this committee, have a hard time believing Secretary Geithner entered into an absolute cone of silence," said California Rep. Darrell Issa, the committee's top Republican.
"In a sharp exchange, Rep. John Mica, R-Fla., told Geithner "Either you were in charge and did the wrong thing or you participated in the wrong thing."
Recalling the early controversy over Geithner's failure to pay some personal income taxes, Mica said: "You gave lame excuses then, you are giving lame excuses now. Why shouldn't we ask for your resignation as secretary of the Treasury?"
"You have a right to your opinion," Geithner said.
Meanwhile, Federal Reserve Chairman Ben Bernanke—another target of recent criticism for his role, along with that of Geithner, in bank bailouts—said Wednesday he was "not directly involved in negotiations" involving payments from AIG to its business partners including Goldman Sachs and other Wall Street firms.
Those negotiations were handled primarily by the staff of the New York Fed, he said.
Bernanke also said the financial conditions of those so-called counterparties "was not a factor in the decision regarding the amount paid to the counterparties or whether concessions should be sought from them."
Bernanke made the comments in written responses to questions posed by Issa. The Fed chief's letter was handed out at Wednesday's hearing.
The Fed chief also said he wasn't involved in discussions with the Securities and Exchange Commission last year about any disclosure issues related to AIG.
When AIG went public and released the identities and payments made to its counterparties in March of 2009, Bernanke said he supported that decision.
Although Bernanke and Geithner have taken considerable criticism, the government's bank rescue effort began under former President George W. Bush and Henry Paulson, his Treasury secretary.
Paulson, also called to testify, was expected to reiterate earlier statements that he didn't know the details or participate in efforts to block disclosure.
Geithner said bold action was needed to get the nation's financial system out of the ditch.
"This was the gravest crisis we had seen since the Great Depression. It was not going to solve itself. Many people advocated we should let it burn itself out. But that would have been catastrophic for the economy. We're still living with the consequences of the damage and the wreckage," he said.
Geithner said the administration would work with Congress on "fixing this mess and preventing it from happening again." "I think every day about things we could have done differently and things we could have done early," the treasury secretary said.
Lawmakers are concerned with revelations about efforts to keep details of the AIG deals secret.
Officials from the Treasury Department and the Federal Reserve Bank of New York worked to keep the public from learning details about those deals and other AIG decisions. The money went to banks to buy bonds AIG had insured.
The banks already had cash AIG had posted as collateral when the bonds' values declined. In exchange for the money, the banks agreed to tear up AIG's insurance obligations.
The effort to conceal information about AIG began with its first bailout in September 2008, according to documents provided by the New York Fed in response to a subpoena from the committee.
They continued through this month, when Treasury representatives made misleading public statements implying taxpayers would not lose money on the AIG bailout, according to prepared testimony by Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, who also was to appear at Wednesday's hearing.
In one of the 250,000 pages of documents, a New York Fed employee wrote, "We have specifically told the firm not to disclose" that the other banks were paid in full for the bonds AIG insured.
In an earlier audit, Barofsky found decisions by Geithner and New York Fed officials may have cost taxpayers billions more than necessary because they did not press the banks for concessions.
The lawmaker who first requested that audit said secrecy at Treasury and the Federal Reserve are undermining President Barack Obama's effort to shore up the sluggish economy.
"When people start to question whether there is transparency, it's hard for the public to be 100 percent on board," said Rep. Elijah Cummings, D-Md.