If there is one thing the political right and the political left can agree on, it’s that we both hated the bailout. We hated the idea of it… we hated the cost of it… and in general, we didn’t want it done, even if we ultimately thought it was necessary. After it was done, we hated a lot of the things that resulted – not only that nobody in the companies lost their jobs, and not only that, they actually got paid BONUSES. That really stuck in our craw.
Where we disagree, however, is where we always do – what happened to cause the crisis that necessitated the bailout, and with all that money being spent, how did we know it was being spent “well”?
This book gives an insider account of what happened, from an insider’s view. When the bailout bill passed, one of the items in the law was for an agency called “SIGTARP” – the Special Inspector General for TARP (the bailout). Neil Barofsky, a tough federal prosecutor in New York, was nominated to lead the agency. He was a Democrat appointed by Bush. This book is his account of how the bailout went down.
If you are on the right of the political spectrum, this book will provide you with plenty of anecdotes to make you feel good about your hatred of government. Barofsky details how power in Washington is viewed by the size and location of one’s office, for example. How one person had an office in Treasury that was ridiculously large. It conferred power. But his secretary and staff? They were in another building! And he also details how Treasury hated the whole idea of SIGTARP, so him and his staff were confined to some basement offices with no equipment, located in a dank, smelly area of the building near the cafeteria.
Barofsky also details how, in order to get things like computers, phones, and freakin’ garbage cans, he had to contract with other government agencies and pay exorbitant rates.
Finally, he details how people within Treasury acted like gossipy teenagers, spreading stories to Barofsky that Elizabeth Warren hated him (not true) and as he found out, Elizabeth Warren was getting fed stories about how Barofsky hated her (also not true).
If you hate government, these stories are like manna from heaven. It is proof that your beliefs in the stupidity of government are spot on.
However, if like me, you are on the left side of the political spectrum, you get plenty of examples of how the banks dominate our government, and that the continuing revolving door between Wall Street and Washington is extremely bad for the country. You get to see how you hope for strong oversight and regulations, but how banks, with their power contacts, hurt TARP, leading to fraud and abuse.
Barofsky had some harsh words for Hank Paulson (the Secretary of Treasury for Bush), but believed that Paulson had a “a ha” moment with the crisis, and supported SIGTARP even though most of his staff did not. However, he was gone pretty quickly. But under Obama, Geithner and his crew were just as bad, and probably worse.
As a key point, Barofky highlights that any time he tried to get rules placed on TARP to avoid fraud – fraud he had seen first hand as a prosecutor trying Wall Street crimes, Treasury rebuffed him with the simple comments of “banks would never do that, it would risk their reputation.” Even though banks played a gigantic part (in my view, the sole part) in destroying their reputation by causing the crisis to begin with, Treasury – full of people who had worked in those big banks, couldn’t see that, and wouldn’t see it despite any plea. Thus, few rules for moral hazards were put in place, and Barofsky details some of the criminal fallout that occurred – things he waned Treasury specifically about.
However, when it came to helping homeowners who were underwater, Treasury was very skeptical. At that point, moral hazards were the most important thing. While one can understand the argument – why should a person get a reduction in principal owed on his underwater house when he is behind in his mortgage, while his neighbor who is on top of his mortgage doesn’t – the simple fact is that moral hazards only came into play when it wasn’t for the banks. In fact, Barofsky details how the loan modification programs, which dragged on and on and on and never really worked, were actually intended to just drag out the process of foreclosures, such that the banks didn’t have to process gazillions of foreclosures at once – the failing loan modification program was used, to quote Geithner, to “foam the runway” (i.e. keep the plane (the banks) from exploding on a crash landing (foreclosures)).
All in all, a very entertaining book. I have read a few books detailing the financial crisis, and most of them can be pretty dry. This book is not long, and has fun, personal anecdotes from the author. If I were to list any complaint with the book, it’s that it jumps around a bit, without necessarily telling you what new topic it was covering. At times, this made it difficult to know – should I keep reading this tonight because he’s coming to a conclusion by way of this new story, or is this something completely different that might keep me up for another couple of hours. You don’t ever want to put the book down when he is in the middle of something, so a few more “topic headings” for lack of a better term, would have been helpful.