A while back I built a spreadsheet to do math about AIG, and it took me a long time and led to basically one short post with what I still think was a rather lovely blobby picture, so I’m just going to shamelessly reuse that spreadsheet with slight updates and be all OOH LOOK AN IRR:
So yeah: as the AIG bailout saga comes to its sort-of conclusion, we can sort of conclude that the government made a 5.6% return on its money. Assumptions etc. in the original post; the accounting profit ties out reasonably well, if you squint, with the Treasury’s official math.
Herewith some random observations and questions on AIG:1 Read more »
Barofsky met with Geithner in the fall of 2009 to express his concern that the Treasury Department had made TARP unpopular by not being fully forthcoming about how TARP was being used, including not forcing banks disclose how they were spending TARP funds. Geithner got dramatic, [Barofksy writes in his new book, Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street and said] ‘Neil, you think I don’t hear those criticisms? I hear them. And each one, they cut me,’ he said, pausing and then making an emphatic cutting motion with one hand as he said ‘like a knife.’” After a Geithner subordinate in the room, Herb Allison, expressed personal offense at Barofsky’s suggestion that Geithner has not been fully transparent, Barofsky responded, “I am not suggesting that the secretary has failed in transparency, I am stating it. Mr. Secretary, you’ve failed to be sufficiently transparent, and that is one of the reasons why people are so angry. But you can still fix it.” And that’s when the ticking time bomb that was Geithner erupted, telling Barofsky: ‘No one has ever made the banks disclose the type of shit that I made them disclose after the stress tests. No one! And now you’re saying that I haven’t been fucking transparent?’ Cooler heads prevailed, and the meeting went on, but Geithner never really came fully off the boil. “As we parried back and forth, Geithner repeatedly reached a pitch of anger, regaling me with detailed expletive-filled explanations that established my apparent idiocy. He would then calm himself down and give me a forced, almost demonic smile.” After the meeting was over, Barofsky and his deputy, Kevin Puvalowski, had a big laugh about it. ‘In all honesty, I think he was about to come out of his chair and beat the living shit out of you,’ Puvalowski remarked. [HuffPo]
NB: The S&P put out an estimate saying that the next crisis may cost $5 trillion in upfront costs just to deal with the large institutions and their assets. Where are we going to find with $5 trillion?
DR: Good question, where are we going to find it?
NB: I have no idea. And that’s the path we’re going down as a country.
DR: Counselor, you’re scaring me.
NB: You should be scared. I’m scared. Read more »
The federal rescue of the financial system in 2008 has provided large financial institutions with an unfair advantage in the form of cheaper access to credit, a bailout watchdog warned Thursday. “Absolutely and unambiguously the financial markets believe more than ever that the United States government will step in and save the ‘too big to fail’ institutions should there be another financial shock,” Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, said at a hearing of the Senate Banking Committee. [WSJ]
“While there was consensus that Citigroup was too systemically significant to be allowed to fail, that consensus appeared to be based as much on gut instinct and fear of the unknown as on objective criteria,” according to a report today from Neil Barofsky, special inspector general for the Troubled Asset Relief Program. “The conclusion of the various government actors that Citigroup had to be saved was strikingly ad hoc.” [Bloomberg]
Earlier this week, Troubled Asset Relief Program’s inspector general Neil Barofsky issued a report noting that the Treasury’s estimate that it will lose $5 billion on its AIG TARP investment “represents a dramatic shift from the $45 billion loss that Treasury had projected in its AIG investment just six months earlier.” Barofsky went on to say that “while AIG’s fortune may have indeed improved during the course of those six months, there is a serious question over how much of this decrease comes from a change in Treasury’s methodology for calculating the loss as opposed to AIG’s improved prospects.” Some people did not like that. This morning, the White House took it its blog to respond. These are its best moments, starting with the first line:
* Some people just don’t like movies with happy endings.
* How else to explain this week’s report by the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP)? Read more »
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.”
Read more »
SIGTARP Neil Barofsky- who is testifying later today- is adding oil to the AIG fire, saying in prepared remarks that French regulators were actually willing to negotiate AIG’s obligations after all. The claim further undercuts the argument the Fed has been using all along, namely that they didn’t push domestic counterparties to take haircuts as foreign regulators were unwilling and/or legally barred from taking discounts.
Read more »
…an attitude honed during eight years of fighting white-collar criminals and Colombian drug lords as an assistant United States attorney — he still has the knife from a foiled attempt on his life in a field outside Bogota — are propelling Mr. Barofsky over barriers that have slowed the others.
SIGTARP’s Neil Barofsky Is Way More Badass Than We Realized [Daily Intel]
We are shocked, shocked to learn that book cooking has been going on in here. (Maybe). At least, TARPs “top cop” thinks so. (Maybe). Apparently, he’s on the case. (Maybe).
The official policing the $700bn Tarp fund says he is investigating whether banks have “cooked their books” to secure bail-out money.
Neil Barofsky, special inspector-general for the troubled asset relief programme, told the Financial Times he was seeking evidence of wrongdoing on the part of banks receiving help from the fund, which was designed to ease credit conditions and support distressed industries.
“I hope we don’t find a single bank that’s cooked their books to try to get money but I don’t think that’s going to be the case,” said Mr Barofsky, who has been dubbed the “Tarp cop”.
We hope so too! True, we’d have lots to write about, but imagine the crash that would follow if it turned out a few good banks had been a little more than aggressive with the accounting. All bets would be off, we suspect.
Tarp investigator seeks evidence of book fiddling [The Financial Times]