Early on in Congress’ $182 billion bailout of insurance company American International Group, or AIG, the federal government said the final cost to taxpayers of that bailout would be a staggering $45 billion.
Then late in 2010, an apparent “miracle” occurred: The Treasury Department declared that the losses to taxpayers would be “only” $5 billion instead.
Hooray!
But don’t start celebrating quite yet.
The inspector general for the bailout program, the so-called Troubled Asset Relief Program, or TARP, says the Treasury is using cynical accounting tricks to hide the real cost of the AIG bailout — which he says will be closer to the massive $45 billion loss originally predicted.
The inspector general, Neil Barofsky, said the government quietly changed the way it measures potential losses from the bailout, relying on rosy projections about stock prices and such. Then it loudly proclaimed that the loss to taxpayers would be far lower than it is actually likely to be. When he asked the Treasury to correct its claims, his request was denied.
“[T]his is a significant failure in [government] transparency,” he told The New York Times.
U.S. Rep. Darrell Issa, R-Calif., agreed. “If a private company filed information with the government that was just as misleading and disingenuous as what Treasury has done here, you’d better believe there would be calls for an investigation from the SEC and others,” he told the Times.
And Sen. Charles Grassley, R-Iowa, said, “[A]dministration officials are trying so hard to put a positive spin on program losses that they played fast and loose with the numbers.”
That’s cause not for celebration but for alarm. It’s bad enough when Congress wrongly bails out some companies. Dishonesty about the cost of those bailouts is appalling.