Neil Barofsky, who served as the special inspector general for the Troubled Asset Relief Program from December of 2008 to February 14, 2011, has a new book out, and wow, is it ever a dilly! Titled "Bailout: An Inside Account Of How Washington Abandoned Main Street While Rescuing Wall Street," it details the extent to which various TARP-related programs, like the Home Affordable Modification Program, failed miserably, and the difficulty Barofsky and his SIGTARP team had in navigating the treacherous bureaucracy of the U.S. Treasury as they tried to serve the public interest.
There's good news and there's bad news. The good news is that things are actually much, much worse than you've heard. What's "good" about that is that it means the book is packed with exciting new details of awfulness, and isn't that why people buy books? Okay, so there isn't any good news. The task of honest Washington regulators remains exceedingly difficult. The SIGTARP operation, by Barofsky's account, comes across as chronically underfunded, outmanned and disrespected.
Tim Geithner? Oh, he's just the worst. It would seem that whatever redeemable qualities he possesses are swaddled in a whininess that borders on the pathological and an unwillingness to cleave to reality. Time and again, he dismisses the notion that some basic fund accounting can be undertaken with bailout proceeds with the airy dismissal that money is fungible and there's nothing anyone can do.
If there's any good news, your poorly approved Congress comes off much better by comparison (if you've never been particularly well inclined toward Alabama Senator Richard Shelby, you should be prepared to rethink things). Though, to a certain extent, Congress' heroics are a by-product of SIGTARP's media strategy, which allowed them to manifest public pressure on Congress successfully at many critical junctures.
What's the bad news? (Or, I guess it's now technically the "worse" news?) Well, the real tragedy is that very little is likely to change any time soon, because Washington's clapped-out, execrable culture of favor-trading and pettiness remains in full effect. (For the purpose of not tarring the wrong people with this brush, readers are advised that I am using the term "Washington" to refer specifically to the critters who populate Capitol Hill, and not, say, area bartenders or the people who work at the Washington Symphony Orchestra.)
Prior to coming to Washington to head SIGTARP, Barofsky was a highly regarded prosector in the Southern District of New York, where he built big cases against FARC drug traffickers in Colombia and mortgage fraudsters at home. His diligence in pursuing the latter scofflaws put him on the radar of the Bush administration when it came time to establish SIGTARP, an appointment that came despite the fact that Barofsky was a lifelong Democrat and an Obama supporter.
His experience in attempting to build the case against FARC, on the other hand, gave him a fair idea of what he might expect in Washington. After the Department of Justice got knit up in his case and ran roughshod over it, Barofsky swore he'd "never, ever take a job in Washington," opining that "the people down there don't care about justice or protecting the United States. It's all about bullshit, ego, politics, turf and credit."
For a Washington outsider, that's a very good intuitive take on Washington's political culture. The only things he was leaving out were the whininess, the thin skins, the way "activity" is more highly valued than "achievement," the pure paranoia and how easily an honest person can succumb to all of Washington's bankruptcy. To learn all of that, and to confirm what he already knew, Barofsky had to come to Capitol Hill.
But as an anthropological study of Washington's awfulness, Barofsky's book is pretty wonderful. And it doesn't spoil the story at all to highlight just those observations and lessons that Barofsky includes in his brief. The simple fact of the matter is that by perfectly nailing down the habits and behaviors of the species that slouch through the halls of power, Barofsky banks enough credibility to stuff the Fed discount window.
Let's run through the highlights, shall we?
IN WASHINGTON, IT IS JUST ASSUMED THAT YOU ASPIRE TO BE A SELL-OUT
"Bailout" begins in medias res with a detailed description of a 'clear the air' meeting at a D.C. bar between Barofsky and then-"TARP czar" Herb Allison. Allison -- after the requisite "Do you know who I am?" conniption over not getting seated where he wanted -- proceeded to lay out the many ways that Barofsky could hurt his "bright future" if he failed to hit the right "tone" in his oversight. As things stood, Allison was of the opinion that Barofsky was "really hurting" himself. Barofsky asked, "In what way?"
"Well, you're a young man, just starting out with a family, and obviously this job isn't going to last forever. Have you thought at all about what you're doing next?"
It was not the first time I'd been asked that question in Washington. It's the question that everyone asks ... What's next? What's your angle? What's going to be the payout? How are you going to leverage your position to get a better one with more power and a bigger payout?
IN WASHINGTON, EVERYONE IS OBSESSED WITH THEIR PERKS
After his successful confirmation, Barofsky contacted Treasury IG Eric Thorson, with whom he'd had a brief, perfunctory meeting ahead of the confirmation process. He called with the hope that Thorson could offer him some advice on how to "get up to speed on" TARP.
I made the mistake of starting off the conversation by asking him if he had any tips.
"Make sure you get an account at the Treasury Dining Room. It's very good and very affordable. As a presidential appointee you get to use it," he told me.
Barofsky writes, "That wasn't exactly the type of tip I was looking for."
WHEN WASHINGTON BUREAUCRATS LEARN OF A WELL-FUNDED OFFICE, THEY START ANGLING FOR THAT CASH
SIGTARP was funded with an initial $50 million outlay, and once the word got out, bureaucratic con men came a-calling.
Bizarrely, I began receiving calls from various government agencies pitching services to us, at a steep cost. I had never heard that there were whole subdivisions of government agencies that served as intragovernmental profit centers. Money in Washington is always sure to attract those who are seeking to get some, and although I expected to be inundated by those in the private sector seeking to part us from our funds, I had no idea the flurry of pitches I'd get from other governmental agencies. Before I knew it, we were signing contracts with Treasury's Bureau of Public Debt, which, in addition to overseeing how the government raises funds to meet its obligations, operates a massive one-stop outsourcing business, from which we purchased, at exorbitant rates, back-office operations, accounting, human resources, and other services.
MOST REGULATORS VIEW SUCCESS AS "GETTING ALONG TO GO ALONG"
Barofsky went door-to-door, soliciting other inspectors general offices for advice. There was one key takeaway:
Although the idea behind IGs was that they would be fiercely independent watchdogs, I soon learned that they were mostly just like any other government agency. As such, their priorities were, in order of importance: maintaining and hopefully increasing their budget; giving the appearance of activity; and not making too many waves.
ON THE OTHER HAND, REGULATORS WHO PURSUE OVERSIGHT WITH DOGGED DETERMINATION ARE DISDAINED
If you're trying to do a good job, it must be because you are obsessed with seeking celebrity:
Most of the IGs I spoke to expressed hostility toward the press and seethed against the "media whore IGs" who cultivated press relationships. The person most associated with this label was Stuart Bowen, the special inspector general for Iraq reconstruction (SIGIR). Stuart was, in many ways, the anti-IG. Although many within the IG community viewed him as something of a self-promoter, to Congress SIGIR was considered a success story for its hard-hitting and widely distributed reports.
WASHINGTON'S MAIN PASTIME IS USING THE MEDIA TO 'RUIN PEOPLE FOR SPORT'
Barofsky gets the skinny from SIGTARP communications director Kristine Belisle:
"You'll start seeing unattributed quotes from Treasury or Wall Street officials saying all sorts of things about you and SIGTARP."
"Like what?" I asked.
"You'll read in the newspaper that a 'senior Treasury official' or a 'high-ranking bank executive' made negative comments about what you're doing, which could run from criticism about specific audits or reports to outright lies ... Or you may see a quote attributed to 'a source familiar with so-and-so's thinking,' which almost always means that it's so-and-so providing the quote."
Barofsky went on to ask Belisle if it she thought SIGTARP should respond in kind. "I won't let you," she answers, "Our strategy will be to never play their game."
IN WASHINGTON, THE BIGGEST COCK-UPS NATURALLY BELIEVE THAT THEY ARE QUALIFIED TO FIX THE MESSES THEY CREATED
For a hot moment, Lee Sachs thought he was going right from the Obama Transition Team to the Treasury.
Sachs, however, ultimately didn't get either of the Senate-confirmed Treasury positions that had been the subject of rumors ... Prior to joining the transition team, Sachs had apaprently made millions by trafficking in mortgage-related CDOs. In addition to his other responsibilities, the New York Times later reported that Sachs had overseen ... Tricadia, which had assembled and sold CDOs to investors in the run-up to the crisis. The Times reported that several of those CDOs had experienced heavy losses as the real estate market turned. But though Tricadia's clients had suffered significant losses, according to the Times, the firm had profited handsomely by making bets against the housing market in one of its hedge funds ... In other words, Sachs had worked at a firm that had successfully exploited the financial crisis and that could potentially profit off of TALF (it later reportedly obtained more that $200 million in TALF loans).
IN WASHINGTON, REGULATORY CAPTURE IS SEEN AS A CARDINAL VIRTUE
Neel Kashkari, a former interim assistant secretary of the Treasury for financial stability, was worried that SIGTARP's activities might somehow rattle the banks, for some reason:
"It's different," he argued. "The banks view you as the TARP special prosecutor. They're terrified of you. They view their regulators differently. They know them. They trust the regulator who is on site all week with them. You are a lot different than the guy who has a beer with them every Friday night."
Unbelievable, I thought. He actually seemed to be arguing that the banks' comfort with their thoroughly captured regulators was a good thing.
A gentle correction. He didn't "seem to be arguing" this. This was his argument.
IN WASHINGTON, HIGH-RANKING OFFICIALS ARE TREATED AS DEMIGODS
Kevin and I went to the Cash Room to see Biden swear in Geithner as Obama stood next to him. I found the fawning reaction from the crowd toward Geithner unsettling. In the Southern District of New York, though we definitely respected the U.S. attorney, we thought of him like any other boss, someone who had to earn your respect. This was different. In Washington, a cabinet official is treated as a cross between Princess Diana, the pope, and Bono. The ceremony felt like a deification.
Related: Yes, the U.S. Treasury has a venue named "The Cash Room."
IN WASHINGTON, THE FIRST RESPONSE TO UNPOPULAR INITIATIVES IS TO 'REBRAND' THEM
With TARP's popularity in decline, Geithner opted for a name-change in lieu of any action that might have actually shored up the public trust, and asked everyone to start referring to TARP as the "Financial Stability Plan," or more simply, the FSP. Every Treasury bureaucrat quickly fell in line.
I learned that this was a longstanding Washington tactic: if a program is unpopular, give it a new name. After the announcement, for a couple of months no one at Treaury would utter the word "TARP" to us, and they even requested that we replace references to TARP in our next quarterly report with the acronym FSP. We, like the rest of the world outside of Treasury, ignored their silly request.
IN WASHINGTON, THE SORT OF GOSSIPY BULLSHIT YOU THOUGHT YOU LEFT BEHIND WHEN YOU GRADUATED FROM HIGH SCHOOL IS COMMONPLACE
Barofsky encounters some Treasury flunkie while walking between offices and gets buttonholed with the news that, like, Elizabeth Warren, like, totally hates him and is saying, like, the worst stuff evarrrr...
My understanding of the duplicitous nature of the world I now inhabited further sharpened when I ran into one of Treasury's legislative officials in late May ... The official stopped me and gave me a lengthy discourse on how he had learned -- confidentially, of course -- just how much Elizabeth Warren hated me, was jealous of me, and was plotting my demise. I knew not a word of what he was saying was true, but I just thanked him for the heads-up and took off.
... AND ON A LONG ENOUGH TIMELINE, EVERYONE IN WASHINGTON EVENTUALLY BECOMES A LITTLE BIT DESPICABLE
At a January 2011 hearing before the House Oversight Committee, Barofsky, scheduled to testify alongside acting assistant Treasury secretary Tim Massad, blew a gasket when Darrell Issa, citing "protocol," let Massad testify ahead of him. He later told his wife about the incident, eliciting the response: "Why would you possibly care?"
I started to explain the deep significance of the humiliating slight but then also started to laugh. "Oh, my God," I said, "I'm turning into everything I hated about Washington."
I had been infected. I'd gone from making fun of and often trampling over Washington's silly protocols to being incensed about testifying second at a hearing. I was becoming one of them.
"That night," Barofsky says, "I started working on my resignation letter." Which is perhaps for the best. In general, the good guys are badly outnumbered in Washington. But once you feel you've become compromised, the best thing you can do is get the hell out of Dodge.
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