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Former Tarp inspector general Neil Barofsky talks about his new book on how the bank bailout money was spent.
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Back on markets now we talked the last couple days about momentum -- building for breaking up the big thanks Tim Geithner actually been asked about it this week up -- not Capitol Hill.
And -- Brodsky talks a lot about Geithner in his book.
The former inspector general of -- -- that the bank bailout fund and author of the new book bailout.
Joins us right now.
-- -- a failure in the sense that did it and kept the banks to size they are and they're still -- -- too big to fail.
Make them bigger and actually I mean -- tell -- a lot of different aspects one of them clearly is you had a problem of too big to fail banks that helped drive us into it.
Enormous financial crisis and the government's response was to protect that status quo and in some ways make the banks big 122 point 5% -- But it's also a failure in the other things it was supposed to do.
Part of the promise that was made to congress the American people to help struggling homeowners to put money back into the economy to get banks lending again it was it -- and all of those things are actually let me just say quick Clark -- so it should did not have happened.
No we have to we had to do something right because that's the whole problem of too big to fail it's.
It's -- truth.
That -- -- once if you have a financial system and we sort of screwed that up so badly in.
Leading up to the crisis the you have banks -- one falsely the -- to take the whole system down.
What at that moment you have to -- out about otherwise you know they're potentially really that consequences.
But now by making them bigger.
Would make him an even bigger threat in making a future about all that more likely which is why is sandy Weill now -- to the party -- but we have to break them up.
That's the end of discussion everybody's talking about now it's it's especially after this Libor.
Scandal which is -- -- broken out about interest rate.
Reading at the big banks in fact your program TARP just came up a minute ago on Capitol Hill because Treasury Secretary Geithner is up -- testifying.
In the context of Libor and here's what was said with senator David that are starting off.
Given.
What we all now agree is very troubling information about Libor.
Law a was it allowed.
To be essentially the repayment -- -- for TARP.
-- way of referring to I I believe is that.
In a series of specific programs the Fed in the treasury undertook in the financial crisis.
We like many investors use Libor as a reference rate.
In many ways we -- in the position investors around the world which is we have to make use of the best available index at that time.
Mr.
frosty the the -- is -- -- I mean.
Please they're not like every -- around the rest of the world in that Tim Geithner in the New York fed had specific information had a confession addicted.
That a confession that the banks at least one bank was an allegations that the rest where.
Manipulating the rates right okay that puts some very different from other investors who knew it wasn't the best rate though -- -- -- -- -- -- the best fake funeral was manipulating flawed -- what Reagan manipulated down.
Which means less money for the taxpayers.
But far worse than that is think about the message that sense of the market when the New York fed and treasury.
Put it's in print and -- behind -- regular some noise and questions about whether it was a legitimate.
And what does the government do does does he.
Alert the markets as -- -- Department of Justice busy telling him hey there's manipulation going on know they stand behind it.
It's the worst thing you can do is a government and financial crisis and -- has led to a lot of the suspicion.
And and feeling -- in Washington and in new York and markets around the world.
But this is all rigged game for the banks and the government participates and that's kind of why I wrote this book to explain -- and with a specific examples.
Of how we've come to this point and why we need to do something about it.
Should he have a job at this point should he have the -- secretary job and with somebody in his place to be any better.
Well I don't know if somebody -- place would be better depends on who that person would be.
Up but no I mean if you look at the failed policies of of the -- which -- detail on this book and you look at the damage it's done.
In certain parts of this country why we don't have a more robust recovery.
I don't think there's any question -- or series of very.
Failed policies that have the results -- a lot of suffering in this country what's ironic then he talked about this in your book but you thought you would have lost your job far earlier.
Had Geithner lost its they almost couldn't fire you because they would look like they were being political -- -- -- right and -- dad you know I I came from New York I was a really schooled in the ways of of Washington it's like out there but I boy I get an education in -- -- And you know I was off -- -- heard rumors that he was pressing the White House -- and added still don't know if they're sure not.
But I was -- I talked to a friend who who knew it.
And he was explained to me that if I -- if he goes jump probably there's no more reason -- -- to keep me around and high real answer this on even know how important -- -- -- Kind of guys Geithner what's it like.
I really don't know you know I've only -- small handful of interactions with him.
They were unpleasant is very dismissive to me one time.
When I suggested that he need to be more transparent front with the American people he went -- -- Expletives the whole they'll have bombs that the F bomb the tantrum.
Would you words OK so they I didn't have the most pleasant interaction them but I don't know him personally he really can't be at arm's length and to really have that that that many interaction would you take this job again.
Director General.
I would probably be little depressed about it but the bottom line is that he was important to have someone there.
Who could protect the interest of the taxpayer when I look back and if we weren't there is an organization advocating for what we did.
I I really believe that we would have seen.
Tens of billions of dollars lost to fraud and I think we did a really important role.
In in stopping some of the worst excesses.
From this deference to Wall Street that was so baked into the TARP and the relationship between.
Wall Street and what happens in Washington and -- just a regular person reads the book.
What do you want them to specifically take away from the same point I didn't know that that's is ridiculous.
They have to understand just how deep the level of deference is.
And how much the banks in many aspects.
Dictated the terms of their own ballot so that every aspect of about even the one that was supposed to help main treat the most.
Bill mortgage modification program.
Was really as we as -- -- book.
Secretary Geithner acknowledged that it was more about -- the runway protecting the banks giving them a soft landing that it was hoping homeowners every aspect of ballots -- like that.
But is as you advocate that you wanted to see more done on mortgage modifications.
And but if that's just so moral hazard of a different sort of like why is it right to.
Bail -- because this is a bang -- it was a bank bail out as you point out in the book but why is a bail out of individuals anymore -- -- just -- Well again you know the justification for bailing out the banks even though the tremendous moral hazard it was justified was for the broader needs of the of the entire economy.
And you have to remember TARP does not get past they don't get that money but for the promise to help homeowners and that's YA announced before a program that was supposed to help four million.
But -- only it's tough to tiny fraction.
And that same justification applies for -- there it is more important to this country.
That we have a recoup a housing recovery.
And a financial system that works and getting out of this deep recession.
It is worrying about some minimal moral hazard that may or may not occur from an effective housing program and we -- -- run but I I do wanna ask you one other thing because this whole talk about breaking up the banks has come up.
How she can happen to sit somebody like Tim Geithner and the Treasury Department and the administration.
Won't support it -- what's the impetus who's gonna lead its network and you know this again one of the reasons why I wrote this book is is to help.
Could contribute to this movement because I think it's so necessary that we break up the banks and in in in essence that's part of what this book is all about.
And look we this needs to be ground up Occupy Wall Street Tea Party and everyone in between.
Everyone knows that our system is inherently broken and inherently tilted -- since the financial interest and people through direct democracy we need to get up.
Put pressure our leaders and tell them we're not voting for you again we're gonna vote for the other guy.
If you don't compete if you don't admit to attack and this this vice like -- these institutions have -- -- there was that -- -- it was -- bail out it was TARP gave -- does he -- it was that one moment that was the Genesis of it and Occupy Wall Street rooted at least in part in the same thing it's not left it's not right it's not Democrats not Republicans not conservatives not liberals.
It's America thank you --
