Former TARP Official: Both Parties Are Captive to the Big Banks
While the current presidential race has predictably devolved into a series food fights over tax returns and awkward speech wordings, the nation’s economy limps weakly along. In addition, the causes of the 2008 financial crisis still remain a dormant threat to the global economy — a point that neither candidate seems interested in addressing. Enter Neil Barofsky, the former Special Investigator General for TARP, the $700 billion bailout fund launched in 2008 in order to stabilize the nation’s financial system and broader economy. Barofsky is out today with a new book Bailout, which he hopes will refocus the national debate towards how little has changed on Wall Street since the shenanigans of too-big-to-fail firms nearly brought down the global economy.
Bailout is an engaging account of the Washington turf wars and power plays that occurred as the Bush and Obama Administrations tried to revive the nation’s economy in the wake of the financial panic of 2008. Barofsky, an Obama-campaign-contributing Democrat, was plucked from a position in the U.S. Attorney’s office in New York City to oversee the government’s $700 billion TARP fund. But when Barofsky got to Washington, he found the Treasury Departments of both the Bush and Obama administration to be populated with those who either share Wall Street’s view that the broader economy is wholly dependent on the thriving of large, multinational banks, or regulators too concerned with their own career prospects to challenge that view. And at every turn, as Barofsky tried to impose more transparency and accountability on banks receiving TARP funds, he found himself met with resistance — most doggedly from Obama Administration Treasury head Timothy Geithner.
This regulatory capture is the main theme of the book. In a phone interview with TIME, Barofsky said exposing this subtle form of corruption was his main motivation for writing the book. And no official gets it worse than Geithner, who, Barofsky argues, “has shown a remarkable deference to the interests of Wall Street, by protecting them at every juncture through the implementation of TARP and the regulatory reform process.” Throughout the narrative, Geithner and other Treasury officials bristle at and obstruct every attempt to turn up the heat on the banks, whether through auditing their use of TARP funds to ensure that they went to increased lending, or to forcibly shrink the banks through bipartisan legislation like the ill-fated SAFE Banking Act, which would have put hard caps on the size of too-big-to-fail banks.