Around the Web: How a Big Bank Shows Its Gratitude

While the mainstream press has focused on the dubious notion that the Citibank bailout will turn out to be a good deal for taxpayers, the Center for Media and Democracy tallies up the real cost of the entire bailout so far: $4.6 trillion, with $2 trillion outstanding.

Most of that money comes from the Federal Reserve, not the Troubled Asset Relief Program, which amounts to a measly $700 million. The Fed bank dole is handled in complete secrecy, which is why Bloomberg News is suing to get the Fed to open its books, which got the WheresOurMoney treatment here.

As for Citibank and the supposed bonanza for taxpayers, Dean Baker takes it apart in this Beat the Press column. In any case, Citibank is eternally gratefully to taxpayers. Here’s how they’re showing it.

Get out the popcorn. Phil Angelides’ Financial Crisis Inquiry Commission is gearing up for another round of hearings April 7 through 9, this one on subprime loans and scheduled to feature former Fed chair Alan Greenspan, who before the bubble burst, used to take pride in being able to obfuscate any economic issue. If Angelides thought Goldman’s CEO was like a salesman peddling faulty cars, I wonder what he makes of Greenspan, who worshipped the financial deregulation that made the wreck not only possible, but probable.

Angelides meanwhile, appears to be playing down expectations for the FCIC, kvetching to the Wall Street Journal’s editorial board about the small size of the panel’s budget ($8 million) and short time frame (final report due in December).

While everybody was bowing down to Greenspan, they should have been listening to Harry Markopolos, the man who was tried to blow the whistle on Bernie Madoff but was repeatedly ignored by the SEC. Now he’s written a book. He doesn’t think the SEC has improved much.  Russell Mokhiber has a good interview with Markopolos in his Corporate Crime Reporter.

Around the Web / Federal Reserve / Financial Crisis Inquiry Commission / Securities and Exchange Commission (SEC) - 04/01/2010

Obama to Bailout Cop: Beat It!

The Obama administration, which has increasingly been adopting a can’t do attitude when it comes to putting real teeth into financial regulation, now wants to take out the teeth already in place.

Treasury officials are signaling they’d rather not have the same aggressive special inspector general overseeing the $700 billion federal bailout anywhere near their new $30 billion bank subsidy to encourage lending to small business.

I wrote about that inspector general, Neil Barofsky, a couple of weeks ago, suggesting he was one of the few public officials actually trying to protect our money rather than just acting as a rubber stamp for Wall Street’s raid on the U.S. Treasury.

Barofsky has issued a series of scathing reports raising questions about federal officials’ handling of the Troubled Asset Relief Program.

Treasury officials contend that although the $30 billion would come from unspent TARP funds, it’s technically not TARP. So Barofsky should butt out. Their real reason for not wanting Barofsky around is simple: the banks don’t like him looking over their shoulders.

You can’t blame the banks for that. No doubt it’s a lot more fun to spend your federal handout without some nosy former federal prosecutor scrutinizing every move you make.

But for the Obama administration to go along with it is troubling and baffling. The president promised an unprecedented level of accountability, understanding that openness would go a long way toward restoring credibility in the financial system and the government’s ability to oversee it.

But Treasury officials appear to be more concerned with keeping the bankers happy than they are with keeping them honest.

The news about Barofsky surfaced as the administration appeared to be backing away from its recent embrace of former Fed chief Paul Volcker, who favors limits on bank size and risky financial trading. Predictably, the financial titans were balking at the proposals.

The administration’s move against Barofsky is both bad policy and bad politics. It seems designed to hand live ammunition to the mistrustful antigovernment troops of the Tea Party.

Meanwhile, Congressional Democrats have been quiet on the issue. The president and the Democrats have accomplished what at one time would have been seen as a nearly impossible task: handing the mantle of accountability and openness over to Republicans, who are howling with outrage over the idea of keeping Barofsky away from the small-business lending subsidy.

Rep. Darrell Issa, R-Ca., said earlier this week: “Denying SIGTARP the ability to defend taxpayers sends a chilling message that IGs who conduct real oversight will be punished for holding this Administration accountable.”

At the very least, the administration needs to come to its senses and regain its commitment to transparency. Let Barofsky do his job. The administration should be paying better attention to his criticisms, not trying to get rid of him.

Action / Martin Column - 02/25/2010

Bailout Beat Might Be His Last

Most of official Washington operates in a state of slow-mo lethargy when it comes to working on financial reform.

Not Neil Barofsky, who is saddled with the cumbersome acronym SIGTARP.

That stands for Special Inspector General of the Troubled Asset Relief Program, also known as the federal bailout.

He’s a one-time federal prosecutor who in his former life prosecuted Colombian drug gangs and white-collar criminals.

As one Republican senator told him when Barofsky got the inspector general’s job, if he did his job properly, he’d never be able to get another.

Barofsky seems to have taken it to heart.

Last week, along with New York Attorney General Andrew Cuomo, he filed suit against former top Bank of America officials, charging them with fraud for concealing how bad Merrill-Lynch’s losses were from B of A’s own stockholders while B of A was in the process of acquiring Merrill during the melt-down.

Barofsky also recently launched an investigation into the shady federal bailout of AIG and its counterparties, including Goldman-Sachs.

Meanwhile his regular quarterly reports to Congress continue to pack a punch. He has consistently warned against the administration’s rosy predictions of how taxpayers will benefit from TARP.

He’s focused instead on the continuing dangers of doing nothing to rewrite the rigged rules of the financial game that favor bankers’ bonuses and betting with taxpayers’ money over the interests of consumers and homeowners.

“Even if TARP saved our financial system from driving off a cliff back in 2008,” Barofsky wrote in his most recent report, “absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.”

In fact, the whole focus on whether taxpayers are getting “paid back” is a smokescreen for TARP’s failures. While the administration has touted banks’ repayments of their TARP money, the repayments are backfiring on the administration, giving it less leverage over the banks. Released from their TARP obligations, the banks are free to return to lavishly rewarding their employees for risky trades that rack up short-term profits.

Barofsky, writing in plain language that consumers and concerned citizens can understand, states that while the TARP program stabilized the financial system, it hasn’t met most of its other goals. “Lending continues to decrease, month after month, and the TARP program designed specifically to address small-business lending — announced in March 2009 — has still not been implemented by Treasury,” Barofsky wrote in the January 30 report. “The TARP foreclosure prevention program has only permanently modified a small fraction of eligible mortgages, and unemployment is the highest it has been in a generation.”

Barofsky was appointed by Congress to monitor TARP. Yet Congress has done nothing to hold the current administration accountable for the bailout’s failures. Meanwhile the Senate continues to pursue what appears to be its quest to squelch reform, in direct contradiction of what a majority of Americans want. Specifically Sen. Christopher Dodd appears to be on the brink of negotiating away a stand-alone Consumer Financial Protection Agency, a linchpin of President Obama’s reform plan. The financial industry fiercely opposes such an agency.

Contact your representative and senator today and let them know you support Barofsky’s strong work on TARP. While you’re at it, let your senator know you’re paying attention to the battle over financial reform, and that they should start paying attention to the will of the majority instead of the bank lobbyists.

Martin Column / SIGTARP - 02/09/2010