Happy Talk

Treasury officials and many politicians are busy patting themselves on the back because the Troubled Asset Relief Program will end up costing taxpayers less then expected.

The way these folks describe it the TARP and other aspects of the federal bailout were just supposed to function as a loan program for the banks while they were having some trouble.

TARP is also winning praise for having “restored trust” in our financial system.

Beyond the scary rhetoric that gave birth to the bailout and self-congratulatory sermons it’s being buried with, the bailout consisted of a set of rules and a way of picking winners and losers in the economic crisis that did anything but build trust.

Remember when the Fed chair, Ben Bernanke, insisted that he was a Main Street guy, that he was interested in the financial system only inasmuch as it helped out Main Street?

But the bailout institutionalized a system where the government could only afford to bail out the biggest bankers and corporate officials while abandoning smaller banks and business owners along with millions of troubled homeowners and vulnerable employees.

As Fortune’s Alan Sloane wrote, “the more bailout rocks you turn over, the more well-connected players you find who aren't being forced to pay the full price of their mistakes.”

Oh well, the apologists say, nothing’s perfect. It could have been so much worse.

One official who hasn’t joined in the festivities is Neil Barofsky, the former special inspector for the Troubled Asset Relief Program, who bid the bailout a scathing farewell in the New York Times, which you can read here.

The Obama administration and bailout apologists would like to have us believe that it was just a necessary first stage of the recovery to ensure that the bankers stayed rich and the wealthiest Americans’ increasing share of the nation’s wealth kept on growing.

But in Barofsky’s view, there was nothing inevitable about the no-strings attached bailout that filled the bankers’ pockets while offering little to Main Street. It had nothing to do with the operation of the free market either. It was very carefully crafted by public officials working hand in hand with Wall Street to maintain its power while gnawing away at the increasingly fragile livelihoods of ordinary Americans.

As Barofsky notes, “Treasury officials refuse to address these shortfalls. Instead they continue to 
stubbornly maintain that the program is a success and needs no 
material change, effectively assuring that Treasury's most specific 
Main Street promise will not be honored.”

And while recent employment gains are welcome news, Dean Baker points out the losers – African-Americans among whom unemployment remains distressing high and wage earners in general, whose pay is not keeping up with inflation.

The bailout celebration is just part of the happy talk designed to buoy the notion that the recovery is well underway. But this bailout-fueled recovery continues to pick highly predictable winners – with the powerful, wealthy and politically connected doing swimmingly while everybody else just limps along.

 

 

Around the Web / Martin Column / SIGTARP / TARP - 04/04/2011

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

Stuck in the Fog

One thing is clear: Citigroup executives thought they had a deal with the government to pay back their bailout money so they could pay themselves as much as they wanted.

Then it all started to unravel. The Washington Post disclosed that the IRS granted Citigroup huge tax breaks (meaning billions) as part of the exit strategy the "too big too fail" bank worked out with Treasury officials.

After that the stock market rejected the government and Citigroup’s assessment of the bank’s health and the deal fell through.

Goldman-Sachs / Martin Column / President Barack Obama - 12/17/2009

Never-Ending Bailout is Not a Partisan Issue

It would be hard to find two congressmen more politically opposite than Brad Sherman and Jeb Hensarling.

Sherman is solid Democrat from the San Fernando Valley in southern California. Hensarling is a red-meat Texas conservative protege of former senator Phil Gramm.

Sherman and Hensarling may not agree about anything else.

But the two men have been outspoken in one shared view: that the bailout known as the Troubled Asset Relief Program, or TARP has lacked accountability or transparency from day one.

Martin Column / TARP - 10/14/2009