Bailout: How Washington Abandoned Main Street while Rescuing Wall Street, Neil Barofsky, 2012, 270 pages, Dewey 338.97302, ISBN 9781451684933
The authoBailout: How Washington Abandoned Main Street while Rescuing Wall Street, Neil Barofsky, 2012, 270 pages, Dewey 338.97302, ISBN 9781451684933
The author was the special inspector general for the Troubled Assets Relief Program, the 2008 Wall Street bailout.
2019 update: the $700 billion Wall Street bailout ended up costing $16 trillion. --/Money, Power, and the People: The American Struggle to Make Banking Democratic/, Christopher W. Shaw, 2019: https://www.goodreads.com/review/show...
Top financial-institution executives know that the U.S. Government will bail them out if their bets lose. Wall Street has captured control of the U.S. Government. p. 19. [Obama had to kiss Wall Street's ring to get the campaign money to win the presidency, as Charles Gasparino details in /Bought and Paid For/: https://www.goodreads.com/review/show... .] Obama filled his administration with bankers and let them give hundreds of billions of dollars to their firms to recover their losses from their fraudulent transactions. Same as George W. Bush's team did. pp. 90-95. Every secretary of the Treasury has a callous indifference to the public interest and a slavish bias toward Wall Street. As does the president who appointed him. p. 149.
PERVERSE INCENTIVE
Subprime loans earned the lender higher interest and fees than prime loans. The less chance the borrower had of repaying, the more the lender received. No one on Wall Street--rating agencies, accountants, banks, lawyers, brokers, notaries, appraisers, …--cared to look at fraud, as long as they were getting fat fees. pp. 13-16, 84-95.
WANT TO BET?
The big banks created, marketed, and sold (purportedly AAA but in fact junk) bonds they expected to plummet in value as the real estate market soured; the banks placed large bets that their bonds would tank; the banks reaped profits from their dishonest bond sales. The Bush and Obama administrations appointed the bankers to administer hundreds of billions of dollars of bailouts to their banks. pp. 91-95.
I OWE HOW MUCH?
The orgy of subprime and subsubprime lending ballooned Americans' mortgage debt from $5.3 trillion in 2001 to $10.5 trillion in 2007. p. 87. https://www.wolframalpha.com/input?i=...
USELESS GOVERNMENT
U.S. Government procedure for investigations: "adopt a narrative:" define the status quo as a success. Bury all evidence suggesting otherwise. pp. 8-9. The bailout administrators ignored the many ways fraudsters could steal the money. p. 22. The Treasury Department gave banks hundreds of billions of dollars with no verification that the banks were "healthy and viable," no oversight, no terms or conditions to comply with. pp. 71-77. Inspectors general behave as lapdogs to the agencies they're supposed to watch. p. 61. Congressmen and senators enact laws without reading them. pp. 50, 96. Senators questioning administration officials don't care what the answer is. They care only about getting their question on the news. p. 30. "I had done one of the stupidest things possible. I had trusted someone." pp. 79-80. The FBI tips off the press ahead of search warrants and arrests. p. 108. If a program is unpopular, give it a new name. p. 123.
GOVERNMENT AGENCY PRIORITIES
1. Maintaining and hopefully increasing their budget. 2. Giving the appearance of activity. 3. Not making too many waves. p. 51.
PLAY TO WIN
The only way to make things happen in Washington is to make sure that Congress and the public are aware of the problems you see, so they can then pressure the agency to resolve them. The media are key. p. 65. In Washington, being loud is a virtue p. 104.
WILL 2008 REPLAY 1929?
2008: Mortgage fraud is epidemic. p. 14.
2008: 2.3 million foreclosures. p. 4.
Bear Stearns and Lehman Brothers failed due to investments in bad mortgages. pp. 17-18, 142.
September 2008: Morgan Stanley and Goldman Sachs are about to collapse. p. 25. If all the dominoes fall, there could be another Great Depression. p. 43.
AMERICANS LOSE
September 2007 to December 2008: people's 401(k)s lost $2.8 trillion, 1/3 of their value. p. 4.
October 2008: Congress passes Troubled Assets Relief Program (TARP), a $700 billion Wall Street bailout. pp. 1, 103-104.
October 2008: Hank Paulson, George W. Bush's secretary of the Treasury and former CEO of Goldman Sachs, /gives/ the 9 largest banks (view spoiler)[(Bank of America, Citigroup, Wells Fargo, JPMorgan Chase, State Street, Morgan Stanley, Merrill Lynch, Goldman Sachs, Bank of New York Mellon) (hide spoiler)]$125 billion, instead of using the money to buy bad mortgages, as Congress wanted. p. 26. The total was $290 billion by November. By December, AIG and Citigroup would be bailed out again, along with General Motors, Chrysler, and Bank of America. pp. 43, 102-105.
November 2008: Obama wins election.
EXECUTIVE BAILOUT
AIG gave its executives $168 million in bonuses. pp. 60, 138.
WHERE'S THE MONEY?
Banks did not lend out the money they were bailed out with. So the bailouts did not help end the recession, did not help businesses nor homeowners. pp. 72-73, 98-99.
DEMOCRATS ARE NO BETTER
January 2009: Obama becomes president. Banker Timothy Geithner, Treasury secretary, dismisses efforts to protect TARP from fraud. p. 113.
HOMEOWNERS NOT BAILED OUT
Though $50 billion was allocated ostensibly to help homeowners, it did not reduce the amounts they owed on their mortgages, and provided no relief to unemployed homeowners. It was a boon to the financial industry, in new fees they could charge. p. 128.
April 2010: Obama's troubled-assets relief program administrator, Wall Street banker Herb Allison, advises Neil Barofsky, the government's special inspector general (SIGTARP), that Barofsky has a choice: make the financial power brokers look good and get a plum job, or tell the truth and end up discredited and unemployed. pp. xi-xvi.
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