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.
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Considering the empirically oligarchical nature of the current US system, I wonder how likely it is that new bailouts won’t be commencing soon–despite the public’s dubious opinion of them. And on that subject, is SIGTARP independent of the DOJ? I am wondering because according the wiki article SIGTARP has worked with the FBI and managed to help out with some prosecutions of minor white collar criminals. And aside from those minor criminals (for PR purposes I suppose) it does not seem that the DOJ has much interest in seeing the SIGTARP mission succeed.
Excellent summary Lambert. The Japanese are 10 years ahead in Queez-Tech. JG is probably right on what comes next. The real deal is in Scewtaponomics and they can’t switch off the ‘screw-tap’ without revealing the hidden code. Yorp is moving to bearded drag-queen idolatry-diversion. Some say QE can’t be tapered, yet once the rich own every asset and capacity, money ceases to matter. The Ponzi guy doesn’t care if his scheme collapses if he’s watching with enough stolen loot from Turks and Caicos. Owning vital assets, the rich may choose to collapse everything else in a positive feedback scheme aimed at making everyone else proportionately poorer. The danger is we might vote them out if they go too far. Their standing plan on this is fascism, along with royalty a mainstay of the divine right of capital. Poverty and Globavision Song Contests is the next ploy, a sort of no bread and bad circuses thing. Britain finished 17th in Eurovision and will now leave the EU. It’s as logical as that.
The state is certainly prepared for fascism… to enable it, not fight it. When you look at the vast apparatus of our security/survellience state (domestic spying and data collection, the militarization of local police, street cameras, facial recognition software, drone technology, etc) and how that apparatus has been deployed in the last few years (the brutal response not only to peaceful protests but to average Americans going about their legal business… cops gone wild, etc), it’s pretty much a done deal, should things start to drift that way. Everything is ready to be operational at a moments’ notice.
MUCH ADO ABOUT NOTHING?
Having read only news reports of Geithner’s book, it is difficult to come to any conclusion whatsoever regarding this post’s allegations. Yes, it is right and proper that there be different interpretations about the circumstances at the time.
Note also that the Toxic Waste Mess was not just another “minor affair” on Wall Street. It prompted a major economic catastrophe for many Americans that is still working its insidious way out of the system.
The present controversy, prompted by Geithner’s book, therefore deserves a full-fledged airing. Instead of a tit-for-tat in literary format, why not ask the two guy’s to slug it out on prime-time with the above questions posed and the debate managed by a neutral moderator?
NB makes some good points, and a great many of us are perplexed with Geithner’s handling of the situation. But it’s really unfair to second-guess the conduct of a Treasury Secretary in the midst of a major financial maelstrom safely ensconced five years later behind a desk in an office. Especially as regards a person who’s career has not been primarily in Investment Banking before his nomination as Treasury Secretary. (Like Paulson …)
Geithner needed to publish this book. Now he needs also to defend it in public.
By the time Geithner was ensconced, the crisis was over. Paulson and Bush, hate them as we should, had staunched the bleeding and so the crisis had morphed into a difficult situation by the time Geithner et al. came into positions of power. Geithner and the rest of the Obama team had important decisions to make, but to say that they were in a maelstrom overstates the case by an order of magnitude or more. They had from election night into early February to think through what they wanted to do.
Huh? Were you asleep during the crisis? Did you miss that Geithner was at the New York Fed, and with Paulson and Bernanke, was one of the critical actors during the crisis? Go read Too Big To Fail, it was Geithner who told Lehman to file for bankruptcy, for instance. Or that it was Geithner at the NY Fed who had the AIG CDS paid out at 100 cents on the dollar, rather than demanding the dealers take haircuts? And at Treasury, did you miss the role Geithner played in dealing with the mortgage/foreclosure crisis, as in handling it in the most favorable way?
And let’s not forget that Mr. Obama did not need to select the people he did. In 2009, Obama re-appointed Bernanke. There were plenty of opportunities to change direction, but Geithner was at the center of this disaster and deserves nothing but excoriation. He was the president of the NY Fed from 2003-2009, and Obama picked him as Treasury. In fact, Obama announced his selection as Treasury head in November of 2008. The selection of Geithner probably did more to ruin Obama’s presidency than any other appointment besides Bernanke. Total failure as Fed president; total failure as Tres. Secy.
Your post is extremely naïve. Geithner is a snake. He has already shown his true colors. I don’t need to read his book to know he threw the homeowners under the bus…..I’m living it.
I agree. Tim Geithner is a very bad man.
Barofsky’s book is good. The scale of theft was greater than I thought.
Geithner had been President of the NY District of the Federal Reserve Bank for one year when the FBI stated in open testimony and under oath (Sept 2004) that there was an epidemic of mortgage fraud in the country.
The NY Fed was responsible for regulating mortgage banks since mortgage banks did not come under federal bank charter. That was Timothy Geithner’s JOB.
Publishing the book was only a necessity for the sake of salvaging Geithner’s ego and/or conscience. What Geithner really needed to do (for humanity’s sake) was go back into the hole whence he came. It’s pretty obvious we have more than enough pathological liars parading as public servants.
I find it interesting (and sad really) that anyone would pay to read anything this troll has to say. His actions spoke volumes, and any amount of revisionist history attempting to justify his behavior is a complete waste of precious resources.
I don’t know if the technocratic elite have the same kind of institutional buyers as typical right wing blatherers to keep names and propaganda in the news, but if Geithner’s book isn’t a tell all about O’s golf game or given out at trade conventions, I see Geithner’s book being placed in the religious section at barnes and nobles for the most part.
Paul O’Neill could sell books* because he had a story to tell. Geithner’s book will amount to confirming the Obama branding story and self glorification. Did Gates book sell? It was likely 90% fiction, but he had a plausible perspective and isn’t aligned with his two bosses at the hip. Geithner and Obama became fast pals which means the book can be reconstructed with newspaper clippings.
*He contributed to “Price of Loyalty.”
Seriously? A book by Geithner? Has to be a work of fiction. Has to be.
As is his life in “public service.”
Ya had me at the head of the U.S. Treasury didn’t know how to correctly calculate his taxable income (or someone else who could do it for him). Such is life down the rabbit hole.
Holy Cow, weapons and bullet proof vests? I can see why that might be controversial, since we’re not talking Bonnie & Clyde here. Why shoot when you can just get take the bonus?
But what about bullsh*t proof vests? That was the problem. Nobody in Congress evidently had bullsh*t proof vests when the bank lobbyists visited. They got sprayed with fusillades of verbal & numerical bullsh*t and staggered back into a wall, or backwards over the legs of their chair at the $1000 dinner on Capital (no pun intended, really) Hill, their arms shaking and head jerking up and down the way it happens in the Mafia movies. Then they laid motionless and quivering, in a red puddle of common sense with little splats of common sense on the walls and white tablecloths. Oh man, what a mess to clean up,
All because they didn’t have a bullsh*t proof vest on.
I bought the rights to the bearded Eurovision drag-queen specifically for this movie Craaz. She’s an Austrian, so proll does economic consultations too. Have to say the machine gun noise will help the tune along.
Aren’t we allowed to say “bullshit” on NC?
Sorkin’s article is quite a puff piece for Geithner. It is damning for him and the NYT.
Every paragraph may be summarized TINA: There Is No Alternative. I assume that this will be the theme of his apologia when it hits the stores.
Bit by bit, the truth is coming out about how he deliberately blocked reform. I’m looking for his relations with Rubin to be elaborated.
Sorkin offered “five takeaways” for the article (illustrating just what morons he thinks we are) but he forgot takeaway #6:
Andrew Ross Sorkin is a hack.
Hear! Hear!
When Sorkin goes to the Hamptons he doesn’t chillax…he shillhacks!
Sorry for that. Not adding quality here. He just makes my skin crawl.
Every time my elderly Mother saw Geithner on the TV news, she said, “He looks so shifty and guilty. I don’t think I’ve ever seen a man in government that looked so much like a gangster.”
Truer words could never be spoken. It is for these insights, and more, that I will always love you, Mom!
In the end Klassy, I guess we have to dataorise the skin crawling. I’m doing a presentation on QE for some bankers and regional groaf economists next week based around this BoJ paper and 20 others:
http://www.cirje.e.u-tokyo.ac.jp/research/dp/2011/2011cf814.pdf
The 2-day event is about using EU Regional Development Funds. There will be a few there as dispirited as me and we’ll probably troll off to get drunk in a rough pub rather than mingle at the hotel. Oddly enough, this small group probably make 80% of the successful bids and project formation. The bad boys and girls. We reckon we’re lucky to get 20% of the funds to ‘real people’. Most of us can now barely stand to be in a room with the others. Skin literally crawls.
The economics is just no good, as a 2 minute scan of the linked paper demonstrates. It’s 2014 and the problems were obvious in Japan in 1990 (actually much earlier – I was there in 85). The problem is addressing it as a matter of economics. It’s just make work for the elite, even the heterodox. At root, building anything has become a cost, not an investment, because the monopoly finance game is played with the same money.
Do we really think the Japanese are inferior and incapable? That we have the superior economists and politicians? Apart from being stupid, that’s racism.
if you use the funds to pay for economic studies on how to use the funds, and then use the remaining funds to pay for studies of the studies, and then pay for studies of the studies of the studies — eventually producing a well designed report with a fancy logo — you can use all the funds with maximum economic efficiency. Since by the time you’re done, even though you’ll be out of funds, you’ll know EXACTLY how to best use the next round of funds. They won’t argue with that.
I never stay long enough to do the final report that precursors the start of the game again. By then I have already done a thesaurus job on a previous submission long forgotten, with the new metrics and jargon terms, suitably cut with text from the last time evaluators are likely to have done any reading (1960 is a safe bet), and slanted at the forthcoming tranche of “cash” and match funding. See you at conference Craazy – you are clearly a regular.
He’s just a poster boy for the whole “journalistic” system, whose two rules are 1) we must have access to the decision makers at all costs, and 2) news is what powerful people tell us is important and true. To check the veracity of what one is told risks access and shrieks of “bias”. So just tell it like the man in the suit says and all will be fine.
Great comment! That’s the best description of modern “journalism” I’ve ever read.
Sorkin also left out point # 7…..How much he truly appreciates the Wall Street reach-around.
Don’t you remember the hearsay rule?
If you’re going to write about factual assertions, shouldn’t you read the book to get the facts before you accuse anyone?
As for carrying guns, who cares? Do you really think that’s why people still debate the 2008 bailout because your people carried guns?
Yes, Geither’s failure to hold the banks accountable and to work on behalf of homeowners was egregious, but I don’t see how your writing above is adds to public awareness about the topic.
Oh, puhleeze. This is not a courtroom. The colleague who had managed to see the book in advance of publication passed on narrow, specific statements, not broad generalizations. Those are unlikely to be inaccurate.
More important, the book is not out yet (the pub date is May 12) but Geithner is already shaping the story around the book through ADVANCE media appearances and a few book reviews based on ADVANCE copies being circulated to favored outlets (they seem to be going with limited distribution, since yours truly regularly gets advance copies of finance and economics books but didn’t this time).
There’s tons of cognitive research that says that once people have heard a storyline, it’s very hard to dislodge. That’s why, for instance, it’s a rule in politics that you need to respond in 24 hours when an story adverse to you breaks, otherwise the narrative will have cemented and you won’t have a chance to affect it.
So the media cycle around books happens to dovetail almost perfectly with what a propagandist would design: the author/proponent gets to present his side and dominate the conversation, while critics either remain silent until they get their hands on the book, or can try to influence the narrative in the timeframe when that can be done based on what they can glean from the insiders who got early access to the book.
The point about guns, as I read it, means either: (1) Geithner is pathetically clueless, or else (2) he’s delusional. Either way, Geithner’s failure to support the safety of law enforcement personnel is deplorable.
As for ‘hearsay’, note the contrast between these two men:
1. Barofsky continues to align himself with law enforcement, criminal investigations, and large, complex financial crimes – including fraud.
2. Geithner, OTOH, aligns himself with Warburg Pincus.
For Geithner to get pissy about Barofsky is ridiculous. Methinks Geithner doth protest too much.
It does not reflect well upon Geithner.
Whoops!
should have read:
“Barofsky continues to align himself with law enforcement, AND WORK ON criminal investigations, and large, complex financial crimes – including fraud.”
The system is a total fraud. Believe it or not, most Americans get it on some level. What happens over time remains to be seen.
It is a bit unfortunate that Neil Barofsky’s response is not to Geithner’s book itself, but rather to what he has been “informed” of as to the contents of the forthcoming book. As a former prosecutor, I would have expected him to wait for the evidence. Barofsky’s book is excellent, and I recommend anyone curious read it, especially in conjunction with Sheila Bair’s book about her experiences.
See my comment above: http://www.nakedcapitalism.com/2014/05/neil-barofsky-geithner-forthcoming-book-resorts-already-discredited-factual-mischaracterizations-name-calling.html#comment-2115089
This book, like most oligarch memoirs, is part of the battle for history. It’s probably support for the narrative of TINA, which is repeated by both the promoters and the cultists. They keep telling that story both to deflect righteous anger and to normalize continued control.
It’s nice to know we’re still worth being fooled.
And, of course, there will be no mention of all of Geithner’s dereliction of duty as the New York Fed Governor that led up to the mess in the first place.
Thanks so much Lambert and Yves.
My reading so far tells me the Geithner is working as a propagandist, not as an historian, and the record needs to be righted immediately.
Paulson, Bernanke, and Geithner saved the financial system. This is not just what they say about themselves but what others say about them. What is left out in this is whose and which financial system. The system they “saved” was a criminal, corrupt combination of massive looting, the largest frauds in human history, and gambling to the tune of multiples of the world economy’s yearly output. They saved this system not by reforming it or reducing its scale or powers but via a multi-trillion dollar bailout, of which the TARP was one of the smaller parts. And they acted not on our behalf (indeed Paulson with his talk of martial law made it clear we were perceived as a likely enemy) but in the service of the rich, the banks, and the elites to which they variously belonged. Because they saved this predatory system and not us, we can expect our looting by it to continue and for there to be further future crashes engineered and exploited by it.
Parenthetically, there is a whole genre of books written by ex-political and government officials in defense of their own dubious records and to settle personal scores. They do not elucidate. They do not provide insight. They are rather vanity fiction. It was after all only a few months ago that ex-Secretary of Defense Robert Gates visited one of these efforts upon us.
Great comment, Hugh!
Terrific synthesis.
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As for Gates’ recent bio, having read about 2/3 of it, the book that I would *really* like to read is the one he’ll never write ;-)
However, he raises some serious issues about the process of funding defense expenditures, as well as the problems that are continuing to fester because the US has used so many ‘contractors’ (in large part for “plausible deniability”) that the line of command has been broken, and rogue contractors have become a threat. Gates raises some important issues that deserver more public discussion.
Addendum: It seems that Geithner wants to continue insisting this is an economics story.
It isn’t.
As you point out succinctly, it’s actually a crime story. A large, complex, and multifaceted crime, but a crime nevertheless.
Barofsky gets that.
Which is why he has far, far more credibility than Geithner – no matter how many books Geithner writes.
A nostalgic reminder of those days,
Bill Zucker’s TARP song
https://www.youtube.com/watch?v=yGfQk9XXm24