On the last day of his job, the special inspector general of the Trouble Asset Relief Program (TARP) has penned his exit letter -- and, predictably, it isn't pretty. While ordinary people have been feeling the aftereffects of the bank bailout on the economy -- broadly, wider gaps in economic disparity -- Neil M. Barofsky breaks it down for us exactly what went on. Total systematic failure.
The act’s emphasis on preserving homeownership was particularly vital to passage. Congress was told that TARP would be used to purchase up to $700 billion of mortgages, and, to obtain the necessary votes, Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the act expressly directs the department to do just that.
But it has done little to abide by this legislative bargain. Almost immediately, as permitted by the broad language of the act, Treasury’s plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.
As we now know, TARP's homeownership goals went down the drain as the banks padded their pockets [and continue to do so]. At this point, embattled homeowners are as likely to benefit from suing for foreclosure fraud as from government provisions. Barofsky details some of these failures, noting that 'no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds.'
After gouging and obliterating Geithner for obsessively talking the talk but not walking the walk, Barofsky lands a particularly square punch -- calling out the ineptitude and total kowtowing of the government to big banks for unnamed purposes, while pointing out that the 'biggest banks are 20 percent larger than they were before the crisis and control a larger part of our economy than ever.'
In the final analysis, it has been Treasury’s broken promises that have turned TARP — which was instrumental in saving the financial system at a relatively modest cost to taxpayers — into a program commonly viewed as little more than a giveaway to Wall Street executives.
We've all known it. But it's refreshing [if distressing] to see someone in a high level of power telling us the truth. Read the rest at the New York Times, via the Daily Beast.