Approaching the four-year anniversary of the bank bailout of September 2008, Neil Barofsky, the gentleman given the title special inspector general for the Toxic Asset Relief Program, is offering some details from an insider's perspective of what has been only speculation up to this point.
Barofsky, author of the new book Bailout, also published a first-hand account in Bloomberg.com of his "oversight" of the $700 billion bailout of financial institutions that spanned the administrations of both George W. Bush and Barack Obama.
The former SIG shared some harsh realities:
• The Department of Treasury was assigned to "preserve homeownership" yet made changes at a "glacial pace" that contributes to "the current economic malaise;"
• Banks "received broad immunity from future civil cases arising out of their widespread use of forged, fraudulent or completely fabricated documents to foreclose on homeowners" within terms of the bailout;
• "The top banks are 23 percent larger than they were before the crisis. They now hold more than $8.5 trillion in assets...The risk in our banking system is remarkably concentrated in these banks, which now control 52 percent of all industry assets, up from 17 percent four decades ago;" and
• "The financial markets continue to bet that the government will once again come to the big banks' rescue."
The person tasked with enforcement and oversight of the TARP scheme has a dismal assessment of the program. Barofsky found that the institutions that engaged in high-risk investments that failed have become larger. The losses generated by these large private institutions were covered by the average taxpayer. Worst of all, very little has changed.
Barofsky's conclusion: "The American people should be revolted by a financial system that rewards failure and protects those who drove it to the point of collapse and will undoubtedly do so again."
The arrogant politicians and bureaucrats who believe they can regulate around the power of natural market forces and engage in cronyism are, ahem, toxic assets, indeed.