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Why Neil Barofsky’s Book “Bailout” Matters

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Matt Stoller is a fellow at the Roosevelt Institute. You can follow him at http://www.twitter.com/matthewstoller

Neil Barofsky’s new memoir Bailout, is not just a great read, it’s also a very important story about what happened after the financial crisis. Barofsky, who was the Special Inspector General for TARP, was in a vantage point to view the entirety of the Obama policy apparatus, from the use of TARP to pad bank balance sheets to Treasury’s PPIP program to the reorganization of the auto industry to the housing crisis. And he doesn’t disappoint, packing the story full of flashy anecdotes which give more than any book I’ve read a sense of what it’s like to be in DC in a powerful position where your goal is not to get along with the actors controlling the status quo. The book paints the atmosphere in DC’s melange of agencies, bureaucracies, and Congressional halls as a mix between the drudgery and petty bureaucracy of Office Space and the world-cleaving tension of Too Big to Fail. As a Congressional staffer, I worked a bit with Barofsky’s office, so I’m going to give a slightly different perspective on the book than what you might have read elsewhere. You see, what very few have picked up on, even those who liked this book, is that it’s essentially a story about the importance of Congressional oversight in reigning in corruption, and the problems of our imperial Presidency.

By way of background, it’s helpful to understand why Barofsky was even in DC and what his job actually was. As it turns out, the US government has a variety of mechanisms for preventing corruption. The one relevant to this story is the Inspector General position, which is a standard oversight “ombudsman” style operation that pretty much every government agency has. These officials are supposed to oversee their departments, writing reports about their activities and ferreting out problems and corruption. IGs tend to report their findings to Congress (usually  to the special subcommittee on oversight for each specific committee), and Congress then takes action (or not). Barofsky was the Inspector General for the Troubled Asset Relief Program, or TARP, a position created by a skeptical Congress when Treasury Secretary Hank Paulson asked for $700 billion to buy toxic assets on the balance sheet of various banks.

To put it simply, this is the book that explains that in fact, yes, your suspicions of what Treasury was up to are correct. It’s not a series of hints and parsing of statements of various high level officials, it’s a straightforward account by a watchdog who fought with Geithner via bureaucratic tricks, the press, in Congress, and in meetings with Treasury and DOJ personnel. Throughout Barofsky’s 27 months in office, members of Congress on both sides of the aisle and Neil Barofsky’s office worked together to attempt to reign in the worst of Treasury’s abuses.

The book is a memoir, and it starts just before Barofsky went to Washington as SIGTARP, recounting briefly his career in the US Attorney’s office in the Southern District of New York. The Southern District is an office with jurisdiction over Wall Street, a track record of effective high profile white collar prosecutions, and a strong bipartisan alumni network. Barofsky talks about one of his cases going after the narco-terrorist cartel in Colombia, or FARC, and how he jousted with various government agencies – the DOJ and the State Department – to push the case forward in the face of bureaucratic stubbornness. Barofsky came dangerously close to being assassinated by the cartel, as he learned later. At one point during the case, while on the Amtrak train, he noticed a man staring at his computer screen, and it turned out to be Joe Biden. Biden told him that the biggest obstacle to enforcing international narcotics laws was not corruption or traffickers, but “the United States State Department.” It’s these little nuggets that are the heart of the book. For instance, at one point, Barofsky notes that if you see the media reporting on a high profile arrest of a criminal, it’s most likely that the FBI leaked the arrest to the press, since the agency is a notorious manager of its own self-important image. Barofsky also discusses another case, of a fraudulent commodities company called Refco, which introduced him to the complexities of the modern financial system, including the repo market. Barofsky presents himself, accurately, as a straight shooter New York Southern District prosecutor, someone who dislikes DC and just wants to do his work going after bad guys.

Of course, in 2008, he is called to Washington, as the last appointee of the Bush administration, to staff a new position overseeing the bailouts. He’s a Democrat, but somehow secures a Bush appointment, and he learns that it’s the bipartisan network of the Southern District alumni who get him the spot, because of his experience going after Refco. He heads to DC, and persuades his colleague Kevin Puvalowski to become his deputy. The book goes through setting up the offices, with the attendant bureaucratic problems of everything from getting office supplies to getting responses from Treasury to understanding what the role of an IG actually is to walking through how the various overseers of TARP and officials in the Bush and Obama administrations behaved over email and in meetings.

This book illustrates the bureaucratic pettiness and power of the Obama administration, as well as explaining the role of Congress in the process of running government. One of SIGTARP’s first initiatives was an attempt to find out how banks were using their TARP funds; Treasury didn’t want this done, and argued it was impossible to find out, since money is fungible. It was an absurd argument, of course, and Barofsky went ahead to try and send out surveys to TARP recipient banks. Yet, the Office of Management and Budget must approve all government requests for information to the private sector, and held up their surveys. Barofsky explained this slight delay to Barney Frank in a meeting, and Frank who immediately got on the phone and screamed at Geithner. The surveys went out. Score one for Congress. Again and again, in the book, Barofsky works with Democrats and Republicans in Congress to expose problems with TARP and the bailouts, prevents errors by the Federal Reserve and Treasury, and publicly shame the administration into improving their housing programs.

Perhaps the most important revelation in the book is a meeting with Geithner that Barofsky recounts, where Geithner says that Treasury’s housing initiatives were successful, despite their inability to stem the tide of foreclosures. The programs were meant, Geithner says, to “foam the runway” for banks, spread out foreclosures since banks couldn’t take a hit all at once. The publicly stated rationale for administration housing initiatives, in other words, was simply a lie. The Obama administration didn’t try to prevent a foreclosure crisis, they just spaced it out to help the large banks. This is very important information, and it’s useful that it has come out now.

Institutionally, Barofsky identifies his major points of leverage as the press and Congress (as well as working with DOJ to send some bankers who stole TARP money to jail). His reports generated outrage, and Congressional action. As a result, Treasury had to routinely modify their programs in response to this scrutiny. Congress just loved what Barofsky was doing, because he was validating the suspicions that Treasury was handing taxpayer money over to the banks, and being specific about how that was happening.

I particularly liked Barofsky because he essentially positioned his office as an extension of Congressional oversight. During the period of the bailouts, institutionally, Congress was badly outgunned by the Fed and Treasury, who were working with banks and bank lobbyists to share information and put out aggressive PR. When I was a staffer for Congressman Alan Grayson on the Financial Services Committee in 2009-2010 during this same period, I saw enormous skepticism towards Treasury and the White House. In one of my first staff meetings with Treasury, Congressional staffers literally laughed at Treasury staffer answers to simple questions. But we didn’t have the ability or time to really investigate what was going on. For example, I was one staffer covering five to seven issues for my boss, there was also fundraising, politics, travel to the district, constituent services, the health care fight, NASA reauthorization, cap and trade, and so forth. SIGTARP was one of the few reliable entities we could work with that was dedicated to ferreting out problems with the bailouts. Grayson was obsessed with a really bad deal Treasury had signed with Citigroup to guarantee a couple hundred billion dollars of Citi’s bad assets, so he sent a letter to SIGTARP asking them to look at it. The result was this report, a thorough and high-quality examination of the Citigroup-FDIC-Treasury-Fed deal circumstances surrounding it. That was how Barofsky built such credibility and influence, by leveraging the natural institutional desire on the part of Congressional actors to have oversight and better information over the programs they were voting for or against.

Think about this for a second. Congress’s approval rating is in the toilet, and the legislature is used as a scapegoat for any number of problems. The public likes the President, broadly speaking, but thinks of Congress as immensely corrupt and inept. Barofsky’s book essentially says that the public has this story backwards – it was Treasury, he argues, who was uninterested in preserving taxpayer dollars from fraud. And it was Congress, figures like Barney Frank, Darryl Issa, Richard Shelby, and others, who were the major forces behind what little accountability there was towards the banks. Even more shockingly, Barofsky notes that actors in the Bush administration, from Hank Paulson to Neel Kashkari, were more honest and reliable than those in the Obama administration. Barofsky, a self-described Democrat, found this surprising.

Ultimately, this book is about political corruption, and how it actually works in subtle forms in DC. Barofsky begins Bailout with an instructive anecdote. Sitting in a restaurant with millionaire banker turned Treasury official Herb Allison, he recounts how Allison tried to bribe him. Allison implied that if Barofsky goes softer on the administration, he’ll get a judgeship, or something along those lines. If he does not, well, Barofsky’s going to have a tough time finding post-government work, and he has a young family, so that might be something he should keep in mind. Barofsky’s colleague and deputy Kevin notes that this is a very similar operating model of the drug cartels, who offer either the “gold or the lead”. It’s more subtle and less violent in DC, but the principle is the same. In my experience, this rings true. Winning reelection is far less important than playing ball.

If there’s one problem with the book, it’s that Barofsky never follows this analogy to its logical conclusion. Treasury’s programs, he says, are inept, incompetent, wasteful, intellectually captured, etc. DOJ is afraid to prosecute big cases, unable to go after bankers, etc. Various Treasury officials were deceptive in proposing various programs or engaged in spin or outright lies. But Barofsky never comes out and says either that the Bush or Obama administration pursued policies that were corrupt, for ulterior motives that would accrue to their personal gain. He never argues that TARP itself was itself a scam, or that the lawyers at the Justice Department will personally profit from their government work protecting the banks. Allison offered him the gold or the lead, but Barofsky doesn’t explicitly draw the implications of what that means.

But this is a small criticism. Bailout is a fabulous book, and it rings true to what I saw from my small corner of Congress, and what many of you saw when following the bailouts and the policies pursued by the Bush and Obama administrations. Finally, someone who was there in a pivotal role has a book telling this story.

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52 comments

      1. Lambert Strether

        Is “foamy” like “frothy”? (NSFW).

        In terms of a, well, class critique, it’s interesting to note the pervasiveness of aircraft metaphors in the policy making elite, who do, after all, do a lot of flying, especiall over the flyover states: “turbulence,” “soft landing,” “hard landing,” “glide path,” “headwinds.” “Foaming the runway” is only the most vivid of these; either Timmy’s got a way with words, or the boys in the backroom have exposed only the most anodyne language…

        Nothing about being jammed together like cattle back in “economy” class, though, oddly, or not.

        1. beowulf

          Look on the bright side, at least Tim Geithner doesn’t try to talk like Chuck Yeager.

          “Anyone who travels very much on airlines in the United States soon gets to know the voice of the airline pilot coming over the intercom . . . with a particular drawl, a particular folksiness, a particular down-home calmness that is so exaggerated it begins to parody itself (nevertheless!–it’s reassuring) . . . the voice that tells you, as the airliner is caught in thunderheads and goes bolting up and down a thousand feet at a single gulp, to check your seat belts because ‘it might get a little choppy’ . Well!–who doesn’t know that voice! And who can forget it,–even after he is proved right and the emergency is over.

          That particular voice may sound vaguely Southern or Southwestern, but it is specifically Appalachian in origin. It originated in the mountains of West Virginia, in the coal country, in Lincoln County, so far up in the hollows that, as the saying went, ‘they had to pipe in daylight.’ In the late 1940s and early 1950s this up-hollow voice drifted down from on high, from over the high desert of California, down, down, down, from the upper reaches of the Brotherhood into all phases of American aviation. It was amazing. It was Pygmalion in reverse. Military pilots and then, soon, airline pilots, pilots from Maine and Massachusetts and the Dakotas and Oregon and everywhere else, began to talk in that poker-hollow West Virginia drawl, or as close to it as they could bend their native accents. It was the drawl of the most righteous of all the possessors of the right stuff: Chuck Yeager.”
          (Tom Wolfe, The Right Stuff, 1979)

        2. LucyLulu

          They wouldn’t know anything about economy class. There is no economy class on private jets. If forced to fly commercial, they would certainly fly up front….. for national security reasons, no doubt.

        3. James Shannon

          You want to talk about cute language – little boy talk!
          You totally missed the point of the book. Barofsky is a sissy pants bed wetter – too afraid to give his book a real title!
          “Bailout” should have been titled “The Corrupting Power of Money”! But like Fight Club – we never talk about that or how to end the source of the corruption!
          Let’s talk about how to end that observed reality!
          Tax all Ultra High Net Worth Individuals (Individuals with more than $10,000,000 of Net Worth) out of existence and see if the Corrupting Power of Wealth can be eliminated!
          Now “shoot the messenger” of observed reality begin!

      1. Mark P.

        As Barofsky notes, even some members of the Bush administration — an energy industry administration as the Obama administration is a Wall Street administration — had a modicum of propriety such that energy company Enron’s crimes was prosecuted.

        And maybe this isn’t so surprising. After all, the energy industry does — however one may dislike big coal, big oil, or whatever — provide something real: the energy that makes much of our infrastructure run.

        Wall Street and the banks, conversely, create nothing tangible and principally fatten themselves on the work of the rest of us. They are almost purely parasitic or predatory. And Geithner and the rest of the Obama administration are dedicated to serving their interests, and ensuring that there will never, never be any prosecutions of their crimes.

        And since that will be the case, no, Tim Geithner should not be in prison. Pour encourager les autres, Geither — and at least one or two others — needs to join the choir invisible and be a defunct parrot. Nothing else will make these people pay attention.

        “The terrible, cold, cruel part is Wall Street. Rivers of gold flow there from all over the earth, and death comes with it. There, as nowhere else, you feel a total absence of the spirit: herds of men who cannot count past three, herds more who cannot get past six, scorn for pure science and demoniacal respect for the present.

        And the terrible thing is that the crowd that fills the Street believes that the world will always be the same, and that it is their duty to keep that huge machine running, day and night, forever.”

        - Federico Garcia Lorca

        1. KFritz

          The financial sector DOES have a legitimate function to fullfil. For a while, after the reforms enacted and institutions created by the FDR Administration, Finance was (mostly) regulated into performing its rightful function and prevented from usurping its crucial position to enrich itself disproportionately. Obviously, that was a while ago.

          Finance’s logistically crucial position in the allotment of Capital means that when it goes off the rails, the economy goes VERY wrong

          Ad hominem blasts are cathartic, but not much else.

    1. jake chase

      Stoller expects us to believe that Barney Frank, one of the very worst Congressional bag men, was one of the good guys interested in TARP accountability? He doesn’t understand that Congressional oversight is an oxymoron? He doesn’t understand that TARP was a head feint involving chump change to provide cover for the $20+ trillion doled out to the banks by the Fed? He strikes me as just another process jockey milking one overfed position after another on the federal gravy train. Can’t wait for more self aggrandizing memoirs of his insider status. Keep them coming Matt.

      1. C

        (a) Why is Barney Frank one of the worst bag men? Can you give specifics? (b) How is that inconsistent with wanting oversight on TARP? Even if Frank is corrupt, and certainly his role in overturning Glass-Steegall deserves rebuke, there is no reason why he might not be serious here. Perhaps, having been burned by the fed with the repeal he wants revenge.

        Issa, for example, has acted as if the role of the government oversight panel is to focus on the embarrasing not the real (i.e. Solyndra not illegal wiretaps and assiassinations) but even I have to admit he may still have a real desire to do it right.

      2. Skeptical

        Yes, this is a common meme among rightwing crackpots intent on perverting the history of the financial crisis.

        Whenever you drill down into the details of their accusations against Frank, the substance evaporates.

      3. Carol Sterritt

        This point you make here, Jake, if I can call you that familiar first name, is excellent. The “TARP” that was referred to again and again on the Main$tream media amounted to little more than what us football players designate as being a “Fake Handoff.” Look over there – everyone – 3/4 trillions of dollars of money is being given away. Then on the other side of the field, Ben Bernanke is shoveling trillions upon trillions of dollars into the “digitized accounts” he creates for his buddies The World’s Biggest Bankers.

        But Jake, don’t get your panties in a knot – Ben Bernanke patiently explained to the interviewer on “Sixty Minutes” Sunday night TV show that the money given to these bankers was all “digital money” and since it wasn’t cash, no one here, like the middle class, will ever be penalized for these massive give aways.
        Absolutely no problem for the deficit, said our boy Ben. None, nada, nicht. And either the interviewer from “Sixty minutes” was so flabbergasted, or else they didn’t understand basic economics, that the salient question asking Bernanke about how this digital cash wouldn’t be a problem — why, that question never came up.

    2. James Shannon

      You totally missed the point of the book. Barofsky is a sissy pants bed wetter – too afraid to give his book a real title!
      “Bailout” should have been titled “The Corrupting Power of Money”! But like Fight Club – we never talk about that or how to end the source of the corruption!
      Let’s talk about how to end that observed reality!
      Tax all Ultra High Net Worth Individuals (Individuals with more than $10,000,000 of Net Worth) out of existence and see if the Corrupting Power of Wealth can be eliminated!
      Let the “shoot the messenger” of observed reality begin!

  1. Susan the other

    People have said that this “key lie” is Obama’s achilles heel. In spite of what seemed like his good intentions, he betrayed the people. Everyone seems to know this instinctively. The rumor was that Obama wanted to restructure or liquidate Citi and so did Sheila Bair but Geithner argued against it and convinced Obama, but not Bair. I’m still wondering if the thing Geithner argued was that a big bank like Citi was so entangled with other banks both foreign and domestic that it would be a catastrophe to resolve Citi. Despite the unlimited arrogance of bankers, banks are very fragile. I’d like to hear the details of that dreaded catastrophe scenario.

    1. Pitchfork

      Susan, we’ve waited 4 long years for the “details of the dreaded catastrophe scenario.” There are none. (Maybe that was the implication of your comment?) It was truly a scam, as Stoller suggests. Without bailouts of the banks there would have been serious problems, indeed, but the fear-mongering was just that. Not a single Congressman who voted for TARP give us those details.

      1. Susan the other

        Geithner was just made a national security advisor to the president. Wasn’t he always? And if banking is so essential for our national security, why did it fail so completely? I doubt we will ever see the Military just up and fail like that. And on the other hand, if it is not why does it have so much clout? You’re right, nobody has explained any of this since Paulson threatened martial law. Would looters and scammers make a threat that bold? I’m not making excuses to trust these guys – I don’t have any trust left. If it is a bunch of scammers I can get angry and then get over it. If it is more sinister, I can’t.

      2. C

        I think the fear mongering wasn’t really about the bailouts, it was about the corruption and the crime. At the end of the day Geither fought hard for two things: (1) that TARP money, and others, be sent to the banks, and (2) that no banks would be subject to audits or potential criminal prosecutions.

        The stated reasons (we must recapitalize the banks or all are doomed) are nominally about #1 but as you’ll note they also stopped #2 as well, perhaps by scaring congress into thinking that any actual prosecutions would cause it all to blow up.

        This is, as others have noted here, basically the banks saying “we screwed up we need to be bailed out but oh heavens don’t tell us what to do we know better than you.” Which is what Geither really fought for.

        I’m not sure whether Obama was in on Geither’s point of view from the beginning, whether he came round to it, or whether he is just weak. And personally I don’t care, he is the President, he is responsible for this failure.

      3. LucyLulu

        While I too am skeptical of the “tanks in the streets” scenario had we not bailed out the banks, I’m coming to believe that TPTB may actually have bought into the story. Look at the security measures provided for the RNC, or those that were present for OWS, neither of which has posed real threats. Its equivalent to what was seen during the civil rights and anti-war protests when real violence was erupting (even if not on the part of the protesters). They’ve passed laws limiting the rights to protest. Obama said he was the only thing standing between the bankers and the pitchforks. Tea Party folks use rhetoric about 2nd Amendment alternatives. Tanks and military weaponry has been provided to local police. We rebuke Central America for human rights violations yet it is noteworthy that the US has not signed the Latin American human rights treaty, or any other. Those who speak the truth, e.g. Manning, Assange, suffer severe consequences, held up as examples for any who might have similar notions.

        Why would TPTB be taking these measures unless they think its necessary. They are afraid of the people. They are afraid the people are just a trigger event from revolt and they will need “tanks in the street” to keep the people under control.

    2. MontanaMaven

      For those of us who figured out early on that Obama has no really “good intentions” when it comes to advocating for people over profit; workers over FIRE sector; homeowners over banks; we saw the lie from the get go. The rumor of his good intentions was put out in several books (Suskind’s is one) as election propaganda. Geithner might ultimately have to take the fall, but not Obama. That’s my take anyway.

  2. brian

    America 2012 election the choice between a corrupt lackey and a true believer

    Increasingly one sees stories like this
    If it is true then perhaps the question of this lifelong democrat who has already decided to sit 2012 out is–could Romney be any worse not of Obama but Bush when it comes not to ideology but political corruption?

    1. MacCruiskeen

      Well, Romney promises to repeal the financial regulations that the current administration merely completely fails to enforce. That’s better? Worse? You’re getting screwed either way, just at slightly different rates.

      1. TK421

        But at least Democrats in Congress would offer some opposition to Romney’s bad ideas, where they have merely laid down for Obama’s.

        1. MontanaMaven

          And maybe we again would have peace actions, anti-nuke and anti big oil and gas actions, and civil rights actions. I say “actions”, not some hippie dippy marches and rallies. Sit down strikes and sit ins if they try to do away with Medicare and Social Security. That won’t happen if Obama wins and tries to gut social programs. Most “liberals” with just sit on their duffs and say things like, “We need a movement so that in 2016 we can get more progressives in office.”

          Occupy and the Tea Party should unite to go after the banks and the Fed. I heard a guy from Tampa who is there because his good job in a successful company is being outsourced with help from Bain. But he has made friends with some anti- big government right wingers and the Food not Bombs folks at the “free speech zone”.

          1. LucyLulu

            “Occupy and the Tea Party should unite to go after the banks and the Fed.”
            I agree and have advocated this for quite a while. While there are philosophical differences between the two groups for sure, there are also some fundamental issues agreed upon. If the two factions united on those issues, e.g. banks and prosecutions, we could have far more impact. I’ve tried proposing this to our local TP group. They won’t hear of it. Occupy anything is bad, bad, bad. Occupy = Obama drooling, liberal, free shit, redistributing commies trying to destroy our country. I finally gave up and told them the real plan was to hold any conservatives in rooms bare but for light bulb from ceiling until they had been sufficiently re-educated. ;) I’m not sure some didn’t believe me.

      2. Guy Fawkes

        The decision to vote between Obama v. Romney is like having to decide between dying of cancer or dying of heart disease.

    2. Doug Terpstra

      Obama is manifestly worse than Romney, IMO, the far more effective evil, as Glen Ford of the BlackAgendaReport.com put it. And from this post, Matt Stoller writes that “self-described Democrat” Barofsky “notes that actors in the Bush administration, from Hank Paulson to Neel Kashkari, were more honest and reliable than those in the Obama administration.”

      I hope enough people are finally getting their heads around this—that this is not by accident, not a bug but a feature. Or to paraphrase Lambert Strether — Democrats, and Obama specifically, are retained to inject the muscle-relaxant, the paralytic that prevents effective pushback to the final fascist coup, the substitution of the Shock Doctrine for the US constitution.

      Matt notes that Barofsky stops just short of the obvious conclusion about Obama. Or maybe, like a teacher, Barofsky just wants readers to cross the finish line on their own.

      Charles Hugh Smith has an especially powerful indictment of our current plight in “The Rot Runs Deep” (acknowledging Washington’s Blog’s work in exposing the current corruption.)

      http://www.oftwominds.com/blogaug12/Fed-wealth-transfer-machine8-12.html

    1. Charles LeSeau

      They might as well be blatantly transparent. Nobody is going to do anything about it anyway.

  3. VinnyFitzgerald

    Matt Stoller,
    Kudos to Barofsky for writing a book; but the real scandal of TARP is how “Troubled Assets” (which at the time were debt instruments that were weighing down the assets of the banks) turned into “capital”.

    Congress never approved the capital injections of the TARP.

    I detest Barofsky because neither he, nor Warren (TARP COP) pursued this line of questioning or line of thinking in any of their reports.

    The short Congressional Record is clear. It’s true that folks like Frank, Dodd, and Spencer Bauchus did want the capital injections; but this is not the way we run our democracy!

  4. Pitchfork

    “If there’s one problem with the book, it’s that Barofsky never follows this analogy to its logical conclusion. … Barofsky never comes out and says either that the Bush or Obama administration pursued policies that were corrupt, for ulterior motives that would accrue to their personal gain. He never argues that TARP itself was itself a scam, or that the lawyers at the Justice Department will personally profit from their government work protecting the banks.”

    That’s not a problem with the book. Such a book, that called TARP a hoax, or said that Obama was outright corrupt, would be derided as being from coo-koo land. But Barofsky certainly leads the reader to the conclusion that DOJ lawyers are looking for the next gig, the big payout. And many readers (how could they not?) will also conclude that the Obama administration is simply corrupt.

    Great review of a fantastic, fun-to-read book.

  5. Mary Bess

    I am deeply grateful that Neil Barofsky took his responsibility as a public servant seriously and actually served the public. This makes him an ideal candidate for prosecution. Too bad we have an administration that would have arrested Jesus for throwing the money changers out of the Temple.

  6. Conscience of a Conservative

    This has been said before but it bears repeating. Rubin and hs accolytes Geithner and Summers and others helped create the crisis, and the last thing you would expect from such a team is to own up to their mistakes, so they paper over them and villify anyone who places doubt about the process as Barofsky has done.

    1. Pitchfork

      Yeah, that’s a big part of what has happened. In my view, the vehemence of their defense of the bailouts, and the outlandishness of the disaster scenarios they present as an alternative to bailouts, stems from their own fear of being called out for helping to cause the crisis. Bernanke, Paulson and Geithner (and Rubin and Summers) are all responsible in different ways for what happened, and yet I don’t hear any confessions or admission of serious mistakes.

      According to Barofsky, Geithner sees his only mistake is not trusting himself enough and for not barreling ahead with his awesome, powerful programs sooner than he did.

      I have kids. I know a CYA story when I hear one.

  7. JTFaraday

    “Allison offered him the gold or the lead, but Barofsky doesn’t explicitly draw the implications of what that means.

    But this is a small criticism.”

    So, don’t turn it into a criticism of Barofsky. Use Barofsky as a basis from which to further draw out the implications.

    Surely this is the crux of the matter with regard to why looking to the professional classes that inhabit the government (and academia), as so many liberals and Democrats automatically do, is doomed to repeated failure.

  8. TK421

    “This book illustrates the bureaucratic power of the Obama administration”

    No Mr. Stoller, the president has no power to do anything. Haven’t you been listening to Obama’s supporters these past four years? The president is basically a glorified notary, who can’t do anything unless Congress puts forth most of the work. This is why Obama was unable to do all the wonderful, liberal things he really truly wanted to do.

  9. Conscience of a Conservative

    Suskind’s book is pretty clear here. Obama is not in control of White House Economic policy. Rubin has effective policy control and Geithner has day to day control. Obama’s bee undermined. You can see it in how the non-Rubin crowd have been pushed out.

  10. Dean

    Another disheartening aspect of the book was the characterization (I don’t think it was Barofsky’s) of Inspectors General as lapdogs, watchdogs, or junkyard dogs and now careerism reduces the effectiveness of IGs. The Treasury IG in particular seemed more lapdog than watchdog.

  11. david j michel jr

    oh no it cant be true,obama is for helping the middle class,not wallstreet.thats romneys and baine caps job,wink,wink,nod ,nodd.

    1. rjlaures

      A foreign journalist phrase it like this: “The choice between democrate and republican is like the choice between Tide and Cheer, they’re still both owned by Proctor & Gamble.

  12. Kokuanani

    NC readers might want to make a note: Barofsky will be discussing his book at a FireDogLake book salon on Sept.22, at 5 pm EDT.

    You can follow the discussion without creating a FDL account. If you want to participate, you need to do so.

    Should be great !

  13. Born in the Benighted States

    Of course, an effective attorney general would have made the Treasury’s knavishness moot. Or half-way useful US Attorneys. Am I the only person who remembers the New York USA’s call for boatloads of lawyers to prosecute financial crimes that vanished into nothingness when Timmy & Placeholder were named to the cabinet?

  14. mitchw

    In my own reading of ‘Bailout,’ I noted the importance of the press in DC’s power games. Barofsky was informed by a member of congress, (was it Baucus?), that if the press got interested in a story then the congress could get leverage over the Treasury. We see in the book how organs of govt use the media to fight each other. Notable also was Barofsky’s hiring of a media person that insisted on not spinning their own PR so that they would be trusted and thus more effective. And indeed, Matt is right about the book being a good read. My own feeling was that Geithner was so frigging scared about the reality of the banks that he was determined to use the money and law to keep the system from imploding, and that Barofsky wasn’t on that paygrade.

  15. brian

    from jesse

    “Obama needs to do something to show he is serious about reform, even if he isn’t. Geithner and Holder and a few of his key regulators are a significant impediment to his credibility as a leader of change and reform, but it is not likely that they will be replaced before the election. Obama is often careful to the point of timidity, caught in a web of indecision and conflicting priorities.

    By the way, Obama’s advisors are terrible, but Romney’s are a cabal of neocons and neoliberals, in case you were looking for any comfort there. Comfort is an illusion without significant reform.

    Will Le Charlatan Obama perform some grand gesture to rouse his long-suffering base now that the Wall Street donations well has been booked in this cycle? If he is going to do it, the time is at the end of the week, to take the edge off the other guy’s convention rhetoric.

    Let’s see what happens.”

    my take is the wall street money will make an assessment in mid october so their money won’t have to be reported until after the election–then if it looks like their boy mitt doesn’t have a pretty solid chance in the electoral college based on the swing states they will double down and/or start giving money to obama–i assume obama and his campaign will play this accordingly

  16. Hugh

    Some of us pointed out at the time that Team Obama was out to bailout the banks, cover up their insolvency, and allow them time to charge, steal, and gamble their way back to solvency. With regard to hiding their insolvency, the key was to allow banks to mark to maturity and not mark to market. The whole scheme was meant to prop up housing prices so that banks could claim they weren’t bankrupt and give them time to work through their foreclosure inventory. This was known 4 years ago.

    And while Congress might cut Barofsky a little slack, it’s important to remember that Frank was no reformer, as Dodd-Frank clearly showed. I think he and others let Barofsky do what he did simply because they already knew that it wasn’t going to change anything.

    1. chris

      I agree. Barofsky is much too kind to Frank who did an excellent job over the decades of covering his neo-liberal water carrying for Wall Street with “progressive” rhetoric that partisan Dims swallowed lock, stock and barrel.

  17. Skeptical

    I am still mystified about why Barofsksy was not harder Hank Paulson to task for handing out billions in TARP aid while asking for nothing in return.

  18. Herman Sniffles

    Montana man said “Geihtner might have to … take the fall.”
    Well,let’s just hope there’s no foam on that runway!
    And that drug cartel would have been in big trouble if it had capped Barofsky, because the man’s got integrity, and that makes him and endangered species in DC.

  19. guydetrop

    I just finished Barofsky’s fascinating book. I’d say it’s one of the best depictions of an idealistic outsider learning his way around Washington written since David Stockman’s “The Triumph of Politics” of about 30 years ago. It also reminded me at times of Speer’s book.

    It’s a great read — even though sometimes it’ll make you so angry you’ll jump right out of your chair.

  20. Robert Asher

    Be fair to Barofsky. His job was to uncover fraud in the TARP program. Not to critique the design. And in pursuing his mandate look what he tells us: the mortgage companies in the field were all subsidiaries of the Wall Street banks. If he had been given more latitude, he might have brought cases that would have revealed more about the behavior of our big banks.We know that Barofsky was a talented prosecutor. He must have scared the daylights out of Geithner et. al., who kept him in check.

  21. James Shannon

    “Bailout” should have been titled “The Corrupting Power of Money”! But like Fight Club – we never talk about that or how to end the source of the corruption!
    Let’s talk about how to end that observed reality!
    Tax all Ultra High Net Worth Individuals (Individuals with more than $10,000,000 of Net Worth) out of existence and see if the Corrupting Power of Wealth can be eliminated!
    Let the “shoot the messenger” of observed reality begin!

  22. Gregg Barak

    Bailout is a superb book! Please check out my just published

    Theft of a Nation: Wall Street Looting and Federal Regulatory Colluding, for a wider discussion on the lack of criminal prosecution in the context of the bailouts and regulation.

    Available in soft, paper, and electronic. Here’s a link:

    https://rowman.com/ISBN/9781442207783

    Gregg Barak

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