Wednesday, April 24, 2013

Book Review: Bailout by Neil Barofsky

What the hell happened with TARP? TARP was the $700 billion program to save the economy from collapse. It turned out to be a billion dollar lifeline to reckless banks, the biggest banks, and nothing as advertised to Main Street. Appointed to watch over the TARP program as the special investigator general, Neil Barofsky went from NYC to DC with responsibility to the taxpayers of America. "Bailout" is his play by play of what went down from his arrival in DC to his resignation with TARP. It is a fun read. If you are new to financial innovation, Barofsky does a nice job of breaking things down into simple concepts. While this is his book with his message and his biases, Barfosky comes across as a conscientious, tough but fair prosecutor that you envision when you imagine an honest public servant. I do wish he had explored a bit more the 'why'. As an insider in the TARP scheme, he would have access to some insight as to why the PPIP and other schemes were crafted. Why has no one been brought up on charges for a myriad of crimes, even Sarbanes-Oxley related corporate oversight and accountability issues. One of the best things said about our entire financial f*ck up was stated by Barofsky in an interview where he said to not focus on who the media tells you a bailout is for, but where does the money end up. Follow the money to find out who is truly being bailed out. Check out this book. It is a quick read, educational and enjoyable.
Random "Bailout" Thoughts....
1. Barofsky is told that to make Congress pay attention, he has to have the media all over things. To spur people to his defense, he has to play the media. The media still only reports what they deem worthy to report, so he has to make things interesting or sexy enough to report. Late in his time at SIGTARP, Barofsky comes under fire in the Wapo, but is told that everyone knows the Wapo is in the White House's pocket. There are editorials that read nearly point for point from memos or arguments by his opponents. I love the smell of corrupt, unofficial state organs in the morning. Barofsky was a lifelong Democrat, and even he was not spared. He couldn't be seen casting a true but bad light on St. Obama. The cathedral is alive + well.
2. Sen. Shelby is one of the guys who comes across well. I've always joked how he is Sen. Foghorn Leghorn due to his accent, but he appears sharp, smart and tells Barfosky to go hard in his role. There are some 'good guys' in this circus.
3. Sec. Geithner comes across as a douche. Side note: Geithner was coddled and promoted through the system by Larry Summers who was befriended by in the '80s and a frequent partner in government in the '90s of Robert Rubin. Rubin is the pope of our bankocracy. Geithner even cites how the mortgage refinancing is to foam the runway so banks get time to earn their way out of the hole. Barofsky's retelling of Geithner's comments lays the playbook out right now. The banks are being enabled by our federal government and the FED to try to earn their way out of this hole. This is a repeat attempt (with trillions more money) of the 1980s stealth bailout and extended-'n'-pretend for the money center banks after the LDC debt crisis. In the end, banks had to take their losses, but they only did so after earning millions to cover. They could only earn millions though by lending during the democratization of credit '80s boom. We don't have that credit boom now, so they are stuck trying to rig the stock market higher and earn a ton trading. I'm going to join this to my 'banks are running out the statute of limitations theory' and call this a 'banks are earning billions + running out the statute of limitations to broker a deal with whomever is in charge in Jan '17' theory.
4. The entire city of Washington could be bulldozed and we would run things much more efficiently. Barofsky peppers this book with dialogue, anecdotes and details that reveal how corrupt, territorial and slimy the civil service and DC culture is. Burning the city would be a negative to GDP for a quarter, but the societal improvement would be enormous.
5. Continuing the greatest trick ever pulled, the media's portrayal of the Democrats as fighting on the side of the little guy is so thorough, that even Barofsky, like many of us, thought Obama would be anti-bankster and tougher on fraud. Barofsky quickly learns that the Obama admin is actually worse in their approach than the Bush admin. Besides failing to confront the banks, they use speeches, PR, and politics rather than actual process and policy to fix the problem and help Americans. Obama's administration also lacks focus on details and execution.
There lies the problem. Government has moved from being about good governance and serving the safety, security and development of the nation it represents to a machine like game of looting the national treasury.

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