The markets should anticipate a vigorous defense of their actions during today's political theatre.
What-did-they-know-and-when-did-they-know-it will be the over-arching theme of the questions. According to the US Treasury Department, Geithner was recused from "working on issues involving specific companies," including AIG after he was nominated on Nov. 24th, 2008, for the US Treasury Secretary.
This was the point I made yesterday with Larry Kudlow on CNBC.
However, this will boil down to decisions made during the height of the financial panic and what was the best path to stabilizing the markets.
Geithner has decided to release his testimonyearly to allow for all to see and review. In it, he denies any cover-up allegations: "I had no role in making decisions regarding what to disclose about the specific financial terms of Maiden Lane II and Maiden Lane III and payments to AIG counterparties," Geithner said, referring to Fed investment vehicles that bought securities from the banks according to Reuters.
I think Paulson will also be on the hot seat not only for his role, but also because of his connection to Goldman Sachs . Again, this will be great theatre with the requisite red faces of disgust and disdain for Geithner and Paulson from members of Congress.
The most important element of the testimony for the American public will be the acknowledgement from Geithner that "Taxpayers are unlikely to get back all money pumped into AIG." As Gomer would say, "Surprise, surprise, surprise."
After all the smoke has cleared, this will be the one fact that will be undisputable.
Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.