SIGTARP’s Neil Barofsky released the agency’s quarterly report today and $700 billion later, this is where we stand: the program not only didn’t help anything but had an opposite effect; TARP money is being used to investigate banks’ TARP-related insider trading and Geithner is full of crap.
“Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car.”
Barofsky thinks that many of TARP’s stated goals have “simply not been met,” as the huge, interconnected, “too big to fail” institutions that contributed to the crisis, are now even larger, because of TARP. Good thinking, kind of late in the game, but good thinking.
Along the same lines, institutions that were previously incentivized to take reckless risks through a “heads, I win; tails, the government will bail me out” mentality, are even more convinced than ever that the government will step in as necessary to save them. And regarding bonuses, “there has been little fundamental change in the excessive compensation culture on Wall Street.”
Last but not least, to the extent that the crisis was fueled by a “bubble” in the housing market, the Federal Government’s concerted efforts to support home prices risk re-inflating that bubble in light of the Government’s effective takeover of the housing market through purchases and guarantees, either direct or implicit, of nearly all of the residential mortgage market.
Also, we’re happy to learn that SIGTARP has 77 ongoing criminal and civil investigations, including TARP fraud, accounting fraud, securities fraud, insider trading, bank fraud, mortgage fraud, mortgage servicer misconduct, fraudulent advance-fee schemes, public corruption, false statements, obstruction of justice, money laundering, and tax-related investigations.
Finally -no breaking news here, but worth mentioning- Geithner et al are full of crap regarding AIG:
The now familiar argument from Government officials about the dire consequences of basic transparency, as advocated by the Federal Reserve in connection with Maiden Lane III, once again simply does not withstand scrutiny. Notwithstanding the Federal Reserve’s warnings, the sky did not fall; there is no indication that AIG’s disclosure undermined the stability of AIG or the market or damaged legitimate interests of the counterparties.