Neil Barofsky: Why TARP Failed To Aid Troubled Homeowners


Former TARP Inspector General Neil Barofsky sat down with The Daily Show's Jon Stewart to talk about his book Bailout: How Washington Abandoned Main Street While Rescuing Wall Street and the reasons for the program's failure.

You can read more about that in Matt Taibbi's latest at Rolling Stone: 'Bailout': Neil Barofsky's Adventures in Groupthink City:

Bailout has its first paperback release this week, and Barofsky accordingly is making the media rounds (check out Comedy Central tomorrow), where he'll mainly be asked about the political revelations in the book. You know, the inside-baseball stories of how the officials who administered the TARP bailout fought transparency at every turn, failed to do due diligence on the health and viability of bailout recipients, seemed totally uninterested in creating safeguards against fraud, and generally speaking spent more time bitching about the media and plotting against the likes of Elizabeth Warren and, eventually, Barofsky himself than making sure the largest federal rescue in history wasn't a complete waste of money.

As the former Special Inspector General of the TARP, a key official who was present at the highest levels throughout most of the bailout period and saw from the inside how both the Bush and Obama administrations attacked the economic collapse, Barofsky does have that story to tell, and the book unsurprisingly is full of historically weighty scenes and factoids that will be culled by reporters like me for years to come.

But there's a secondary and I think more interesting subplot to this book, a personal story that will give it more staying power. Just like Will was really a journey-of-self-discovery story that just happened to have the Watergate burglary as a backdrop (the book's real climax comes in the post-Watergate prison years, where Liddy really "finds himself"), Bailout is a kind of Alice in Wonderland tale of an ordinary, sane person disappearing down into a realm of hallucinatory dysfunction, with Tim Geithner playing the role of the Mad Hatter and Barofsky the increasingly frustrated Alice who realizes he's stuck at the stupidest tea party he ever was at. [...]

This moment underscores the randomness that seems to have permeated a lot of bailout policy. Barofsky realizes that Paulson is actually asking advice of a career criminal prosecutor – a man he's only just met, who knows nothing about the subject – on whether or not to bail out Detroit. "What do I think?" he wonders to himself. "I think the only thing I know about the domestic automobile industry is that sweet '95 Chevy Camaro I parked outside."

Another section reads like something straight out of Goldilocks and the Three Bears. Barofsky has it explained to him that an Inspector General shouldn't be too much of a "junkyard dog" ("You don't want to be seen as promoting yourself") and you don't want to be a "lapdog," either (because Congress will get upset and drag you over the coals if they find out you're playing golf with the people you're supposed to be policing). Instead, an IG should be porridge whose regulatory temperature is "just right" – a "watchdog," which in Washington parlance means you want Congress to know you're doing something, but you don't want it to think that it owns you.

Again, all of this advice Barofsky gets has nothing to do with what's best for, you know, the actual country – maybe, in this circumstance, the country needed a "junkyard dog" in that spot, but that's not the way things are done inside the Beltway. According to the twisted logic of this place, your goal is to find a happy medium, where you don't anger too many of the people in the agency you're supposed to be policing, but you also don't go so soft on them that Congress crawls up your rear end.

This is a persistent theme of the book: that Washington is a kind of upside-down world where everyone is all the time frantic about some emergency or other – you can't ever be sure what it is, exactly, except that it almost certainly isn't one of the real-world problems the locals were hired to solve, like the loss of 5,000 points of Dow Jones value in a year or the awesome quantity of toxic/fraudulent loans infecting the books of our major banking institutions. Instead, the characters Barofsky encounters seem to worry endlessly about one-upping each other, not rocking the boat, and avoiding looking like tools in the media and/or to their bosses. Read on...


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