By Neil Barofsky, former Special Inspector General for the Troubled Assets Relief Program, is a partner in the Litigation Department of national law firm Jenner & Block LLP; focuses his practice on white collar investigations, complex commercial litigation, monitorships and examinerships. Immediately before joining Jenner & Block, Mr. Barofsky was Senior Fellow at New York University School of Law’s Center on the Administration of Criminal Law, an adjunct professor at the law school, and affiliated with the Mitchell Jacobson Leadership Program on Law and Business. He is also the author of Bailout.
I have been looking forward to the release of former-Treasury Secretary Tim Geithner’s new book for some time. As one of the central architects and managers of the government’s response to the financial crisis, he deserves much of the credit for what went right in the bailout, and much of the blame for what went wrong. Agree with him or not (and I often did not), his perspectives could be important to our understanding of those tumultuous years.
I have not yet seen a full copy of the book, but I was informed of some of the things that he said about me and SIGTARP, the oversight agency that I headed during Mr. Geithner’s tenure as Secretary. Unfortunately, rather than addressing the many important policy disagreements that we had during the time – most importantly, our repeated criticism that Mr. Geithner’s management of the bailout woefully failed to fulfill the promise made to the American people that TARP would be used to help struggling homeowners on Main Street as well as the big banks – Mr. Geithner resorts to already discredited factual mischaracterizations and name calling.
First, Mr. Geithner suggests that it was improper for the federal law enforcement agents who worked at SIGTARP to carry weapons or have bullet-proof vests. This comment demonstrates Mr. Geithner’s ignorance with respect to law enforcement safety protocols and is frankly insulting to the dedicated law enforcement officers who work at SIGTARP. SIGTARP’s federal agents have all of the same law enforcement powers and responsibilities as the FBI, the Secret Service, and any other white-collar federal law enforcement officers. No one would suggest that an FBI agent would execute an arrest or search warrant in a potentially armed white collar defendant’s home without following standard safety protocols, and Mr. Geithner’s suggestion that SIGTARP agents should not have been afforded those same protections is uninformed and dangerous.
Sadly, this lack of comprehension of the important role of law enforcement too often informed Geithner’s attitude toward potential fraud in the TARP programs. His team often resisted antifraud protections that we insisted be included in the programs, claiming that the banks who were participating in the programs could simply be trusted, a perspective that now has proven to be naïve at best. Thankfully, with help from Congress, other oversight bodies, and even, at times, the Federal Reserve, we were able to overcome Treasury’s resistance and protect the TARP programs from potentially devastating losses, something that Mr. Geithner once even thanked me for.
Hank Paulson* also recognized the important role that we played in deterring criminal conduct, something that he told me was one of our signature accomplishments when he came to speak to my class at NYU. Secretary Paulson also told me that it was his belief that we had done the country a great service by reassuring the American people that someone was on guard protecting their interests. (I reported this conversation, with Secretary Paulson’s permission, in my book). Mr. Geithner, however, apparently claims that Secretary Paulson shared his dim view of me. I would be surprised if that were in fact true.
Next, he apparently claims that in a July 2009 report I said that the government might lose $23.7 trillion, which he concludes was “damaging.” What the report actually ascribes to that number (at page 138) is the “Total Potential Support Related To Crisis” (and not potential losses) of the myriad pledges of support to the financial system from an alphabet soup of agencies and programs. The numbers underlying that estimate, of course, were provided to us by Treasury and other governmental agencies, the report was vetted with Treasury before it was issued, and the report makes clear in a series of caveats that it was not an estimate of actual potential losses. Unfortunately, Mr. Geithner refuses to allow facts to get in the way of good hyperbole.
Mr. Geithner also apparently calls me a number of names and claims that I lacked the necessary financial knowledge or experience for the job. I take great pride in the professional and skilled team that we assembled and the detailed and widely respected reports detailing the bailout that we issued. Indeed, they have widely been heralded as the most complete record of the government’s efforts. Mr. Geithner also ignores the facts when he suggests that we failed to report on the returns on TARP’s investments and that we criticized him without suggesting alternatives. In fact, we issued reports every single quarter that detailed how much money came back to Treasury and that included dozens of recommendations to improve the programs.
Mr. Geithner apparently concludes that our little agency was “damaging” to his efforts to persuade the American people to support his program. While I take it as a compliment that he thinks that our team had such a disproportionate impact, I suspect that the truth is slightly different. The American people considered TARP an unfair giveaway to the largest banks and a failure for Main Street because, in fact, that is exactly what it was.
*In a quote attributed to me in the recent New York Times article on Geithner’s book, it incorrectly ascribes a comment I made about Geithner and his Treasury team to be about Secretary Paulson and Ben Bernanke. Below is taken from the email exchange I had with Andrew Ross Sorkin which makes clear what I said. Unfortunately, the Times has so far refused to issue a correction.
SORKIN: How would described your view of Tim Geithner? In your book you paint a somewhat unflattering picture. What do you think was your biggest debate with him? (And his team, if it wasn’t direct?)
BAROFSKY: I thought it was unfortunate that they consistently put the interests of the banks over those who were supposed to be helped, including struggling homeowners.