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Buy the Book
TARP’s Goodfellas
An insider’s account of Washington’s bailout of Wall Street’s big money men.
Bailout: An Inside Account of How Washington Abandoned Main
Street While Rescuing Wall Street
By Neil
Barofsky
(Free Press, 270 pages, $26)
Neil Barofsky can be forgiven a little posturing. Early on in his short stint as Special Inspector General for TARP — the bank bailouts — he realized that he had no choice but to set aside bureaucratic caution and seize the mantle of whistleblower and reformer.
Barofsky, who before receiving an appointment from the Bush administration had spent his career prosecuting mortgage fraudsters and drug runners, makes it clear he didn’t set out to rock the boat. It was only after he realized how completely Wall Street had captured the regulatory system in Washington that he discerned that there would be no way for him to fulfill his oversight role without being harshly critical of the establishment.
A Democrat, Barofsky is as unsparing of the Obama administration for its handling of TARP as he is of the Bush team. He faults Bush appointees, including Treasury secretary Hank Paulson and TARP “czar” Neel Kashkari (both alumni of Goldman Sachs), for ladling out hundreds of billions of dollars to Wall Street banks and automakers without concern for the interests of taxpayers or consumers. But Barofsky takes special care to document the failures of current Treasury Secretary Tim Geithner in his mismanagement of the bank bailouts, his bungled administration of a program to help distressed homeowners, and his role in deforming the Dodd-Frank Act.
Barofsky’s everyman account of the pervasive cynicism and insider-dealing of the D.C. establishment is the key to Bailout.The book isn’t intended to be a comprehensive narrative of the crisis and bailouts. Barofsky gives only a cursory explanation of the banking sector’s collapse. He doesn’t ever fully engage with the best arguments in favor of TARP, especially the broader case that TARP, whatever its shortcomings, prevented the country from entering a second Great Depression. Nor does Barofsky devote much space to the strongest counterarguments to that claim.
Instead, Barofsky focuses on reporting the shortcomings of Geithner et al. Barofsky claims to have been surprised by the self-interestedness he encountered, and readers of his book surely will be as well. He depicts government officials as, apart from a handful of constantly thwarted good guys, devoted to sharing taxpayers’ spoils with friends.
In telling his story, Barofsky bumps up against a few uncomfortable facts, ones he doesn’t fully acknowledge or pursue. One is that his best allies in government were Republicans, specifically Iowa senator Chuck Grassley and Rep. Darrell Issa of California, both of whom helped Barofsky expose mismanagement and abuse of bailout money. Although Republicans have every incentive to discredit the Obama administration, nevertheless their willingness to help when congressional Democrats wouldn’t cuts against the prevailing narrative concerning Republicans’ relationship to Wall Street. On the other hand, Barofsky’s kindest words are reserved for liberal darling and aspiring Democratic senator Elizabeth Warren, who was working in an oversight role at the time.
The most uncomfortable fact, though, is Barofsky’s portrayal of Tim Geithner as, simply, the bad guy — almost pathologically anti-accountability and pro-Wall Street. Barofsky’s treatment of the man who appointed Geithner, President Obama, is particularly awkward. Obama plays only a minor role in the story, but his presence is always looming behind each of Geithner’s many misdeeds.
Geithner is a tough character to explain. Unlike any other of the regulators Barofsky criticizes, Geithner didn’t come from Wall Street. He is a career bureaucrat, having started at the Treasury Department and worked his way up the ladder, eventually being named president of the New York Fed just before the crisis hit. Yet he’s widely perceived as being closely connected to Wall Street. In August of 2010, the New York Times even ran an article about Geithner’s struggles to correct the persistent misapprehension that he worked at Goldman Sachs.
Geithner was also an oddball among President Obama’s inaugural economic team: National Economic Council head Larry Summers, Council of Economic Advisers chair Christina Romer, and Office of Management and Budget director Peter Orszag were all chosen for their academic brilliance. Geithner was chosen because he was already familiar with the crisis that was still unfolding during early 2009. Nevertheless, Geithner is the only member of the original team still in office today: Summers and Romer long ago returned to academia, while Orszag walked through the revolving door to a cushy job at Citigroup.
Barofsky’s first experiences with the newly installed Geithner were “unsettling”: Geithner called a meeting of Treasury officials and lectured them on interactions with the press, “as if he was angry with us.” Geithner’s attitude toward Barofsky’s efforts was “utterly dismissive.” The best anecdote in the book comes when Barofsky confronts Geithner for a lack of transparency in disbursing TARP funds. “Neil, I have been the most f—king transparent secretary in the history of the Treasury in this country’s entire f—king history!” Geithner screamed.
Personnel is policy: if a Republican president appoints the former CEO of Goldman Sachs to be Treasury secretary, it should be no surprise that this appointee would literally get down on one knee and beg the Speaker of the House to bail out the banks on terms favorable to them.
Obama, however, campaigned against the influence of special interests, and appointed a technocrat to the Treasury. Perhaps Geithner will take a top job on Wall Street after he steps down early next year. Doing so would explain a lot about his motivations. Otherwise, Obama might be left to wonder how he ended up with such a weak record on the banks.
About the Author
Joseph Lawler, former managing editor of The American Spectator, is editor of Real Clear Policy. Follow him on twitter: @josephlawler.
Letter to the Editor View all comments (14) | Leave a comment
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http://spectator.org/archives/2012/08/07/tarps-goodfellas
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Bill Hussein O'Stalin| 8.7.12 @ 6:22AM
The after effects of the bail outs continue to lead to a lack of transparency.
The U.S. Treasury issued a special rule which gives the bailed out companies under TARP protection from a tax law on carried forward Net Operating Losses (NOLs.)
Although the U.S. Treasury can not write tax law they apparently got away with it.
This provision which waived Sec. 382 concerning NOLs will save GM 45 billion in taxes, in essence another net bonus for union employees.
TARP is the gift that keeps on giving to mismanaged companies and keeps screwing the taxpayers.
If the U.S. Congress simply overturned this provision and GM had to pay those taxes along with the other bailed out firms the Bush tax cuts would be neutralized.
http://blogs.barrons.com/stock.....in-profit/
The Wall Street Journal is reporting that General Motors won’t have to pay federal taxes on up to $50 billion in profit, thanks to a provision of its government bailout.
GM may use these tax-loss carry-forwards for up to 20 years, the Journal reported, citing people familiar with the situation.
Based on the standard federal corporate tax rate of 35%, the tax break is potentially worth $17.5 billion to GM, not including tax deductions.
The losses come from the years before GM’s entrance into bankruptcy.
The Journal reports that such tax-loss carry-forwards are usually heavily restricted after a significant change in ownership.
Von Mises Jr| 8.7.12 @ 8:11AM
Von Mises in "Omnipotent Government" speaks of "Etatism" that is the opposite of free market capitalism. It is either socialism or interventionism. At this point, we seem to be on the cuff.
GM just opened up an Agenda21 "Smart Growth" town in Texas whereby if you join their socialist commune, subsidies galore appear for buying a Volt, hooking up to "Smart Meters." etc....
It began a century ago with the Rockefellers and du Pont families among others. The interventionism has evolved toward fascism that GS was bailed out $10B in 2008, the regime engineered a loan to BOA from Berkshire Hathaway with a Buffet windfall of 8%, GM and Chrysler were bailed out while bond holders were raided, and GE earned $14.2B with $5B in domestic profits paying ZERO in taxes.
It seems clear who the new Rockefellers and du Pont "Etatist" are in the 21st century.
RJ| 8.7.12 @ 6:44AM
The closer you observe our government, the worse it looks. We are living though the largest institutional theft in history.
aware| 8.7.12 @ 7:29PM
The greatest criminal transfer of wealth from middle class to the elite in human history. A feat impossible without "government". TARP was the moment of proof that the Republic is dead and a fascist evil twin, that outwardly looks the same, had assumed control.
RJ| 8.7.12 @ 9:41PM
Who would have thought it possible a few decades ago? Yes, we have the trappings of a republic, but the cultural values of trying to live off of others through the power of government has taken over. Each day the actions of our government more closely resemble that of a fascist dictatorship than that of a democratic republic.
RAM| 8.7.12 @ 9:16AM
Once the TARP bailout was thought to be necessary, an honest government would have set up total accountability and traceability for all funds transferred. That's our money, not some bureaucrats' private slush fund! The sloppy way TARP was actually rolled out testifies to major corruption. The financial-political complex!
JD| 8.7.12 @ 12:35PM
Republicans voted it down once, but not the second time. Yet today's Democrats blame Republicans for creating it, while crediting Obama for whatever "good" it did. Typical.
They even abuse its math terribly. In claiming that Obama did NOT increase the budget deficits he "inherited", they simply counted TARP (passed under Bush) as an extra $750 billion spent under Bush, and the repayment of TARP loans as a $750 billion credit against Obama's first year.
There are two problems with this:
1. It's terrible accounting practice to count a short-term loan as a huge "expenditure" followed by a huge "windfall". Honest accounting tracks assets and liabilities alongside liquid cash. Money loaned out and repaid exactly is a net wash, not a tool for massive voter deception.
2. TARP authorized up to $750 billion in loans, but only $400 billion in loans were actually made. The other $350 billion was merely transferred from one government account to another, sat there for a while, and was transferred back. Yet out of these transfers, Obama derives a $700 billion shift in relative deficits from Bush to him!
When a private company moves money between its own accounts to create the illusion of a big windfall, its financial people go to prison. What happens when Obama does it?
cicero| 8.7.12 @ 11:01AM
As I have been saying for about 4 years now, the entire mess was to make sure that the BANKERS did not lose any money. The same thing is now being attempted in the Euro Zone. They will get away with it because the hoi poloi are so ignorant of the economics of the situation that their eyes glaze over when anhyone tries to explain it to them. No one will go to jail, and the game will continue until we elect an honest government. Don't hold your b reathe.
What we have is the elitise game of preferred gambling. Only they get to play the game. If they win, they reap the rewards. If they lose, the taxpayers pick up the losses. With a dishonest administration, and a corrupt Justice Department, nothing good can come of it. If Romney is to win, he has to address this situation.
Conservative Bob| 8.7.12 @ 12:58PM
Did anyone read the story at the Daily Caller regarding internal emails that show Mr. Geitner chose to elliminated the pensions of 20,000 non union GM (Delphi) works simply because they were non union and actually potected and improved the pensions of the union workers at Delphi?
We should spread the word on this story.
These people are vile!
http://dailycaller.com/2012/08.....-pensions/
JD| 8.7.12 @ 1:39PM
What's impressive is the administration's excuse: It wasn't me, it was another government agency!
Terrific. The guys who want government to control everything are absolving themselves of responsibility for government mistakes!
behonest| 8.12.12 @ 2:17AM
this whole tarp thing was our early Oct 2008 surprise. All should read "Reckless endangerment."nobody even mentions this book by Gretchen Morgenson's I know she is a writer for the NYT you know a clock has to be right twice a day. It is one of the most revealing expose's of the last three administrations from the Feds, Sec, Freddie and fannie and the corrupt congress. We were bamboozled by Hank Paulson,Timothy Geithner,Dodd and Barney Frank they all should be in Jumpsuits
TLP| 8.7.12 @ 5:19PM
You took my Post Down, Lawler?
FCK YOU.
MK48| 8.7.12 @ 9:00PM
Ya.........they took one of mine down as well today.
ditto on the YOU comment.