http://www.nytimes.com/2012/07/25/bo...pagewanted=all
From the opening of this latest book on the government’s (mis)handling of the 2008-9 financial crisis, Neil Barofsky establishes his populist narrative from his two-plus years as the “TARP cop” overseeing the $700 billion big-bank bailout officially known as the Troubled Asset Relief Program.
BAILOUT
An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street
By Neil Barofsky
270 pages. Free Press. $26.
Neil Barofsky Talks TARP and Ever After
Mr. Barofsky, a former Manhattan prosecutor, is the idealistic alien sent in an emergency to Planet Washington, where he does battle with the self-important, self-serving powers entrenched there or simply taking a spin through its revolving door to Wall Street. He is SIGTARP (in Washington-speak, the Special Inspector General for TARP). But ultimately he is outmatched, and evil triumphs over good.
In the preface to “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street,” it is April 2010, and after more than a year on the job, Mr. Barofsky is meeting for a clear-the-air drink with one of his nemeses, Herbert Allison, the former head of the financial giants Merrill Lynch, TIAA-CREF and Fannie Mae, who came out of retirement to run the bank-rescue program for the Treasury Department. Mr. Barofsky, wearing an unseasonal wool suit at odds with a “Washington-appropriate wardrobe,” is poised to let the hostess seat them at a front table of her choosing, but Mr. Allison insists on a private table in the rear. Then he gets down to business.
“Have you thought at all about what you’ll be doing next?” Mr. Allison asks Mr. Barofsky, soon adding, “Out there in the market, there are consequences for some of the things that you’re saying and the way that you’re saying them.”
“Allison was essentially threatening me with lifelong unemployment,” Mr. Barofsky concludes, and alternatively suggesting a plum government appointment some day if Mr. Barofsky would simply “change your tone.”
When Mr. Barofsky tells his deputy of the exchange, the deputy says, “It was the gold or the lead,” resorting to the lingo of their joint experience prosecuting Latin American drug kingpins in New York: Cooperate and share the riches, or don’t and get plugged. (With such frequent asides between the two buddies, Mr. Barofsky seeks to lighten what is by definition his otherwise numbingly complicated subject.)
Yet Mr. Barofsky goes on to say that he did not really think that Mr. Allison was threatening him; in fact, Mr. Allison “was, in a very Washington way, sincerely trying to be helpful.” This introductory episode not only sets the book’s tone, but it also embodies the contradictions and inconsistencies throughout Mr. Barofsky’s account.
He writes early on that “I had no idea that the U.S. government had been captured by the banks,” and at another point describes his strategy to use the press to get the attention of Congress, and by extension an obstreperous Treasury: “Our message was simple: Treasury’s desperate attempt to bail out Wall Street was setting the country up for potentially catastrophic losses.” Yet despite such repeated condemnations of the decision-making process in both the Bush and Obama administrations, Mr. Barofsky never really concedes that the predicted losses did not occur.
He refers throughout to the $700 billion bailout, never clarifying that less than $300 billion of that amount went out the door by the time TARP expired; that not a penny went to big banks during the Obama administration; and that those banks repaid taxpayers with interest.
As ugly and flawed as the rescue process was, and as galling as Wall Street’s revived bravado and bonuses can be to most Americans, the fact remains that an economic collapse was averted, and that Main Street is recovering: slowly, but typically so for recessions brought on by credit crises. As Europe’s crisis persists for a fourth year, commentators around the globe have suggested that the Continent should have followed America’s example.
To the extent that Mr. Barofsky acknowledges that neither big losses nor big fraud cases occurred, he credits the anti-fraud measures he pressed Treasury to include in programs and contracts. Yet his book is a chronicle of complaints that Treasury undercut, blindsided and ignored him. Perhaps the biggest criticism of Treasury Secretary Timothy F. Geithner suggested by Mr. Barofsky’s account is that Mr. Geithner should have been a lot more conciliatory toward this zealous inspector general, if only to avoid becoming the biggest villain in Mr. Barofsky’s morality tale.
Mr. Geithner does not fully enter the story until its midpoint. The headline grabber is a recounting of an October 2009 meeting at which Mr. Geithner erupts when Mr. Barofsky tells him that TARP’s unpopularity and the public’s perception of Treasury as subservient to big banks is because of Mr. Geithner’s lack of transparency about the department’s dealings.
“ ‘Neil, I have been the most [expletive] transparent secretary of the Treasury in this country’s entire [expletive] history!’ he boomed, moving forward in his chair. ‘No one has ever made the banks disclose the type of [expletive] that I made them disclose after the stress tests. No one!’ ”
(While Mr. Barofsky pointedly describes the Wall Street background of every Washington player who has one, he never notes that Mr. Geithner does not fit the theme, having served in the public sector, starting at Treasury a quarter-century ago, despite lucrative offers during the Street’s boom years.)
Mr. Barofsky’s book adds little of substance to the mini-library on the worst financial crisis since the Depression, which includes “In Fed We Trust,” by David Wessel of The Wall Street Journal; “Too Big to Fail,” by Andrew Ross Sorkin of The New York Times; and another insider account, “On the Brink,” by Henry M. Paulson Jr., Treasury secretary in the Bush administration.
Mr. Barofsky the ex-prosecutor talks of fighting fraud and “Wall Street criminals” and styles his office as a law enforcement agency, complete with guns and badges. Yet the reader should not expect Eliot Ness. Within a week of starting work in December 2008, Mr. Barofsky has fights that are mainly of the bureaucratic type as old as Washington. He grouses for page after page about being left out of the loop as arcane policies are developed, consigned to a basement office that literally stinks. What scofflaws he takes credit for helping to nab are far from Wall Street: an Alabama-based bank, a Tennessee man with a $10 million Ponzi scheme, a San Diego mortgage telemarketer.
Mr. Barofsky, now a senior fellow at New York University School of Law, does a good job of describing the complex financial products at the core of the crisis. And he does open windows into how Washington works, though not always those he intended.
For instance, like so many actors in the capital, Mr. Barofsky develops backdoor relationships with the offices of friendly Republican lawmakers like Senator Charles E. Grassley of Iowa and Representative Darrell Issa of California, leaking information back and forth to shape news coverage. Then he wonders why Treasury keeps him in the dark?
Mr. Barofsky justifiably spends time on Treasury’s failure to get banks to stem home foreclosures. But he charges that Treasury helped give birth to the Tea Party “by rolling out a hurried and poorly thought-out mortgage modification program,” when what actually spawned that movement was conservatives’ opposition to the very idea of bailing out troubled homeowners, which Mr. Barofsky so favors.
That his book is being released now, amid the presidential campaign, reflects perhaps the biggest contradiction of all: If Treasury has been making policies exclusively “by Wall Street for Wall Street,” as Mr. Barofsky says, why then has a once friendly Wall Street turned so hostile to President Obama’s re-election?
This article has been revised to reflect the following correction:
Correction: July 26, 2012
The Books of the Times review on Wednesday about “Bailout,” a book about the financial crisis, referred incorrectly to banks that received money under the Troubled Asset Relief Program during the Obama administration. About $11 billion of the roughly $300 billion spent under the program went to community banks around the country while President Obama was in office; no money went to big banks during that period.
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Originally Posted by phill4paul
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