Rating the successes and failures of TARP

TARP Special Inspector General Neil Barofsky shares some parting thoughts on the bailout program.

 

MSNBC TRANSCRIPT:

>>> we’re back with new evidence of a housing market in crisis. again, we have two crises in this country, unemployment and houses, and they’re tied directly together. creates the budget shortfall that say we talk about so much. and home prices are sliding in 19 of the 20 cities tracked, they are barely above reinvestigation from the ’06 peak and this dire report comes the same day the house will consider ending the president’s troubled homeowner assistance program which has helped the banks space out the foreclosures but has helped very few homeowners. in fact it has been widely criticized for failing to help keep the millions in their homes it was supposed to, simply help smooth out the earnings for the banks who could roll out the foreclosures over the period of a few quarters. the program was created with about $50 billion from the highly unpopular t.a.r.p. program which bailed out the banks at taxpayers’ expense. ironically some of the biggest critics of the t.a.r.p. program were the one who say oversaw it, which includes outgoing special inspector general neil barofsky. he joins us from washington, d.c. from what we will call his exit interview. the man so critical of the bailouts is bailing out. which is just fun to say if nothing else, neil. where do we stand in the level of unprosecuted potential criminal or civil activity and current risk in the financial system?

>> well, with respect to to our investigations, we’ve charged more than 50 individuals civilly or criminally or helped obtain charges. we’ve convicted 18 people of criminal fraud. we have 150 something ongoing investigations, including more than 70 at financial institutions that either applied for or received t.a.r.p. funds. so we’ve had some great successes so far but there’s a lot of work still left to go.

>> let’s stop there for a second. of all those prosecutions, are any of them at the big banks themselves and do any of them go to the ceo level or the board of directors level and go to the direct issue of accounting fraud in misrepresentation of these mortgage assets in the investment market?

>> well, sure. for example, we have a trial starting, i think, just next week or two against lee fargus, the chairman of taylor bean and whitaker. that’s a multi billion dollar accounting fraud that is mortgages and mortgage-backed securities. there’s been a number of guilty pleas in that case already. our jurisdiction is really only those related to the t.a.r.p. and the t.a.r.p. program, and that program we have jurisdiction because they tried to get more than $550 million from t.a.r.p., which we were able to stop dead in its tracks and save that taxpayer money. and we’ve had criminal charges against a number of ceos of smaller banks as well.

>> where do we stand with the big banks, jpmorgan, citigroup, goldman sachs, wells fargo, those who are really dealing in huge volumes of mortgage-backed securities that were clearly not compliant with the rating that was bowing given to them by the rating agency, which at the time was aaa.

>> with respect to those agencies we would only have jurisdiction to investigate into t.a.r.p.-related crimes, not the time of activity that predated t.a.r.p. and wouldn’t have anything to do with their t.a.r.p. applications, so that really would be outside of our jurisdiction.

>> and that would be department of justice?

>> department of justice, u.s. attorney’s office, sure.

>> i’ll leave that one alone. what is the current risk in the system as it stands right now in your opinion?

>> i think we’re at a very dangerous place. the risk is very high. the largest banks that we were just talking about since the financial crisis have generally gotten larger, about 20% larger. they’re bigger, they’re more interconnected than before, more systemically connected than before. and notwithstanding the authorities and powers that the regulators have to deal with this problem, they’re simply not going to do it. they’re not going to use the power they have to reanyoin our largest banks.

>> why are you concerned they won’t do that.

>> the oversight council which is cared by tim geithner who has been advocating that the tools be used is sheila bahe and she’s stepping down in a few months and no one else seems to be picking up the mantle and challenge she’s thrown down to effectively use these tools to help shrink and simplify these way-too- big fm institutions that are a threat to our system.

>> who would you suggest that journalists like myself and americans who are concerned about this issue, as you leave, sheila is leaving, tim geithner is still very much in place. who should we look to in the government, ted kauffman is obviously gone from the senate, to advocate the rational voice of fairness against the corrupting influence of the banks culture in washington, d.c.?

>> well, i’m stepping down but they will continue to go forward with the important work we have to do. it hasn’t been settled who my replacement is going to be but hopefully it will be someone who will pick up the reins and bow an advocate for the taxpayer and bring transparency and accountability to these issues. i might be stepping down, but i’m not going anywhere.

>> before i let you go, there was an unnamed treasury official, another leaker of some kind to the ” washington post” saying the news of barofsky’s resignation was like a nice valentine to us. do you take that as a compliment?

>> absolutely. i’d like to send that person a thank you note. if anything could better depict both the effectiveness that we’ve had as far as overseeing treasury and unfortunately the juvenile reaction that they have to our oversight, it’s pretty much encapsulated right there. so i do take that as a compliment. if they were — if there were tears being shed about my departure, it means i wasn’t doing my job.

>> well, we look forward to discussing whatever is going on in the world with you and we thank you for making yourself so available to us while you have served the country in the manner that you most recently have. thank you, neil.

>> thank you, dylan.

TARP’s troubled legacy

Although the Congressional panel charged with overseeing the TARP program will be dissolved next month, the state of the nation’s financial system isn’t any less distorted than it was before. Former Sen. Ted Kaufman discusses.

 

MSNBC TRANSCRIPT:

>>> welcome back. the congressional panelling charged with overseeing the t.a.r.p. program on track to dissolve next month and while the panel is disbanding doesn’t mean the state of our financial or economic system is any less dangerous than before.

>> you can’t bail out too big to fail banks or auto markets without dissorting these markets. the question we must ask is did the treasury do everything to rein in those problems? the answer, unfortunately, is no.

>> and the panel’s final report on the t.a.r.p. highlights the problem that still plague our markets years after the financial crisis. joining us now, former senator ted kauffman. senator, what’s the greatest forward risk that you see right now?

>> well, i think it’s still too big to fail. moral hazard coming out of the whole bailout scheme that continues. the idea that banks don’t have enough capital, you know, it’s that whole area we talked about on the floor and talked about in the congressional ?oversight panel’s final report that the special investigator on the t.a.r.p., inspector general talks about it.

>> what’s so bad about having one class of banks, the too big to fail banks, the giant banks that get cheaper mean easier access to capital? why is that such a negative?

>> well the first thing is because what it crates is moral hazard. that’s if you’re running a bank or running any institution and you — if you look at your earnings, you have good years, you have bad years. you have things that go well, you have things that go bad. if you know things can never go too bad what you do there’s great incentive and great incentive for the shareholders for you to take a whole lot of risk. there’s a direct relationship between risk and return. you go for the high risk, high return thing because in the mean time you’ll be making your money. if one time you hate rock you know that will go yeah. the second thing it crates a big problem. the rating agencies are clearly sending a message that they think the banks are too big to fail. all the other banks have to brother and pay more for their money than the big banks do.

>> is that the reason why we don’t have money being invested and lent into our economy, in other words, because you have the ease of returns with the too big to fail banking system and high level speculation, why would you bother for making my productive lorng term investment or lending in america?

>> that’s right. i think one of the things, dylan, i’ve been talking about a lot is the whole way our markets have changed. high frequent trading where markets are less and less interested in banks. they are much more interested in making money and using trading algorithms. i was brought up that our marks are there to help the long term investor and help companies and america that need their capital. a report came out the other day, it’s devastating in terms of the number of initial public offerings compared to china. the number of companies that are ? delisting from the major exchanges. these people are not interested any more in doing what we did and that’s making sure that america is productive. as businesses come back, incredibly disturbing study that because of the way we have now, because of the trading, 70% of the trade on these markets is high frequency trading. because of that, then companies that want to come in and invest and they did this study. they had 17 companies that back when they got there, went into business and went to the valley of death, needed more investment they couldn’t get it. cisco and computer associates and dell, now their initial public offerings nobody is interested because they are too small.

>> if you look at the decision by the banks to try to make their money in things like high frequency trading —

>> things are microseconds.

>> all these sort of things basically that are speculative, short term use of money as opposed to long term productive use of money that’s at their discretion.

>> guaranteed too. remember the whole thing — that’s why we — when we did away with the glass ceiling. if you want to be in the banking business. low risk, low return, you can make money at it. now they don’t want to be. they want the government guarantee but want to be able to go into investment banking business which you couldn’t do before and they are not interested in fees.

>> what’s confusing to me is, again, if those guys running those businesses want to repurpose to do short term speculative activity why is it that the treasury department and the president, this president and prior presidents continue to provide direct subsidies and indirect subsidies to those businesses? in other words it’s one thing if you decide you want to open up a gambling parlor. i can do that. nothing wrong with that. but why is it the government and the taxpayers being asked to don’t subsidize that activity that doesn’t result in lending or investment. why is that?

>> dylan, ate conflibding message. one, the banks are still fragile. that’s why we can’t put new capital requirements on. that’s why we can’t do all the things we have to do. they are still worried about them. they allowed to issue dividends and buy back their own stock. it just doesn’t make sense. there’s too messages coming out from the administration, from treasury, from the fed, from all of them except fdic that say look these things are still fragile.

>> what’s the break down between the president, the white house, the treasury department and the federal reserve and these banks that american tax dollars are being repurposed for these purpose.

>> we have to look what we did in the past. one of the things i talked on your show we should of done what they did after the great depression, put this back in place. what i’ve heard in the last two weeks, we’ve done enough to the banks. we haven’t done anything to the banks. the banks haven’t done anything about their capital requirements. they are still getting subsidy from the fed in terms of the interest rates are zero. all those things are still going on. we have not done the regulation which we all said we have to do. it’s very — causes me great concern.

>> obviously the biggest symptom of it, i have to wrap it up, the fact that money is not invechtd and not left in this country is played out both through the housing crisis and unemployment crys is as if we trade — we’re playing whack-a-mole. we traded the financial crisis for the one employment and housing crisis because they are not a strong political constituency.

>> what concerns you about it is this, in fact, there’s a political constituency out there to do something about home foreclosures but we haven’t put the emphasis on that. you have to wonder where are the incentives to do this.

>> listen, always a pleasure. hope to continue the ? dialogue with you, senator. thank you.

Banksters Revealed Again!

Doc Holliday said, “My hypocrisy knows no bounds” in the movie Tombstone. The same apparently is true for our current crop of Bankster Politicians, many of whom today voted against extending unemployment benefits even after they voted in 2008 for a bank bailout.

Yes, these Corporate Communists not only voted for billion dollar bailouts for companies that were about to fail due to their own terrible decisions, but then subsequently have done nothing to prevent the ongoing and future theft. By destroying this very tenet of capitalism — that the losers actually lose so that new ideas, people, companies can become winners — they have now crippled our economy and kept millions out of work.

Now when faced with giving a pittance of support to many of the same people tossed from employment by their cronyism, they have all of a sudden found ideology. Of course, considering that many of these Bankster Politicians are going to lose their jobs for this, they will try to make excuses like the following:

Unemployment needs to be paid for out of current spending!

And for some reason the bank bailouts did not? But even letting bygones be bygones, I have a suggestion — let’s use clawbacks to pay for unemployment, considering this financial crisis (a) was caused by these people and (b) is why there are no jobs.

But unemployment pays people not to work!

Well, bailing out these banks is even worse — it’s the government literally paying people ungodly sums to destroy our country. Like I’ve said before, there’s a reason why banking is an unpaid job in Monopoly — it is basically a utility rendered unprofitable by modern technology. These bailed-out banks are dangerous casinos gambling with the well-being of America, and America is losing.

Mind you, I don’t even agree with the current unemployment program in this country. I believe people should have to volunteer for a non-profit for 10-20 hours a week to qualify for unemployment. However, our vote-loving politicians like to keep their jobs by giving future generation’s money away for nothing in return.

TARP was to keep people working!

Really? Well then it’s done a terrible job of keeping people working, because unemployment is actually getting worse. The only place it’s actually saved “us” is in the imaginary crony-ist utopia of those who benefited. Their jobs plan is a lucky few of you cleaning the pools built with their $145 billion in 2010 bonuses.

TARP was just a loan and has been paid back, with interest!

I suggest you all familiarize yourselves with THE BIG TARP LIE… and make sure the politicians and media that continue to spout it become familiar as well.

But I was lied to about TARP!

Then do your job. Those people who lied to you were often under oath. They should be investigated and put in jail if found guilty.

So without further ado, I present to you the list of today’s Banksters — those who voted “Yes” for Bankster billions and “No” for their victims. Please check to see if your Senator is on the list:

BANKSTER PARTY

Lamar Alexander [B-TN]
Robert Bennett [B-UT]
Christopher Bond [B-MO]
Richard Burr [B-NC]
Saxby Chambliss [B-GA]
Thomas Coburn [B-OK]
Bob Corker [B-TN]
John Cornyn [B-TX]
John Ensign [B-NV]
Lindsey Graham [B-SC]
Charles Grassley [B-IA]
Judd Gregg [B-NH]
Orrin Hatch [B-UT]
Kay Hutchison [B-TX]
John Isakson [B-GA]
Jon Kyl [B-AZ]
Richard Lugar [B-IN]
John McCain [B-AZ]
Mitch McConnell [B-KY]
Lisa Murkowski [B-AK]
Ben Nelson [B-NE]
John Thune [B-SD]
George Voinovich [B-OH]

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