How Washington abandoned Main Street to save Wall Street

24th July 2012

"Helping banks, not home owners, did in fact seem to be Treasury's biggest concern."

That's the view of Neil Barofsky, TARP's former inspector general who in a new book entitled "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street," says that the $700 billion bailout program that was supposed to reinvigorate the US economy, restore lending and help struggling homeowners, turned into a program that would only serve the financial elites on Wall Street.

According to Barofsky, the Home Affordable Modification Program that was designed to help Americans struggling with their mortgages get above water again, is moving at an incredibly slow pace. As of March 31st, 2012 the number of homeowners helped had only reached around 800,000. Moreover, a promise to withhold funds from banks that weren't helping homeowners (made in June 2011) was short lived. Though Wells Fargo improved, JP Morgan and Bank of America continued to underperform. Either way, everyone got their funds less than a year later as a stipulation of the $25 billion robo-signing settlement against banks.

Barofsky also takes a shot at Treasury Secretary Timothy Geithner who was unduly concerned with negative press coverage:

"Geithner's brusque style struck me as obnoxious. He was speaking to a group of people who had been working their tails off for the past four months trying to keep the financial system from entirely melting down, and he barely acknowledged their hard work and sacrifices."

"Instead, he sternly lectured us, warning us about making stray statements to the press and directing us to minimize any intra-Treasury agency conflicts that might arise. It was bizarre."

So with Barofsky's book set to enter the national debate, Yves Smith, the founder of Naked Capitalism has six reasons why the Obama Administration will hate this book:

6. Barofsky's description of being "Escobarred" by then assistant secretary of the Treasury Herb Allison has the potential to become a classic

5. Barofsky defied White House orders and was subjected to frontal attacks and is alive to talk about it

4. Barofsky makes fun of himself often and recounts his mistakes, so it will be hard to discredit him to those who read the book and aren't part of the problem

3. Barofsky recounts quite a few fights with self important people in wonderfully sordid detail

2. Barofsky says the Paulson Treasury was less awful to work with than the Geithner Treasury. The Paulson crowd would at least go mano a mano on the issues; the Geithner bunch would resort to every kind of petty trick they could find to undermine SIGTARP and discredit Barofsky

1. Barofsky proves that the Obama Administration didn't give a damn about protecting taxpayer money or protecting homeowners, only shoveling dough at banks and AIG (the auto companies were treated like unwanted stepchildren). It's one thing to surmise that, another to deliver the goods.


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