Watchdog: TARP not enough

bornnraisedoffCMR
bornnraisedoffCMR Members Posts: 1,073 ✭✭
edited February 2010 in The Social Lounge
Watchdog: Bank Bailouts Created More Risk in System

FOXNews.com

The problems that led to the last financial crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.

FILE: Neil Barofsky, special inspector general for the Trouble Asset Relief Program (TARP) (AP).

The government's bailout of financial institutions deemed "too big to fail" has created a risk that the United States could face a worse fiscal meltdown in the future, an independent watchdog assigned to review the program told Congress on Sunday.

The Troubled Assets Relief Program, known as TARP, has not addressed the problems that led to the last crisis and in some case those problems have festered and are a bigger threat than before, warned Neil Barofsky, the special inspector general at the Treasury Department.

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky wrote.

Barofsky wrote the $700 billion financial bailout has encouraged more risk-taking because bank executives, who are still receiving massive bonuses, figure the government will come to the rescue the next time they steer their ships nearly aground.

"The market mentality now seems fixed that the U.S. government will continue to step in and bail out giant financial institutions," said Sen. Susan Collins, R-Maine, ranking member of the Senate Homeland Security and Governmental Affairs Committee. "The IG's findings confirm my decision to oppose releasing $350 billion in TARP funds last year and my recent vote to terminate the program altogether."

"The SIGTARP's report is just another reminder of how Congress and the administration have ignored the role that politics and government played in causing the housing crisis and the economic collapse while pursing other regulatory reforms will not fix the underlying problem," said Rep. Darrell Issa, R-Calif., the ranking member on the House Oversight and Government Reform Committee.

The inspector general's report details stonewalling by the Treasury Department over a recommendation that walls be built between managers of the public-private investment program, which uses taxpayer cash to buy bad assets, and employees of the fund management companies which sell the toxic assets.

Barofsky's report outlined 77 cases of possible criminal and civil fraud, including crimes of tax evasion, insider trading, mortgage lending and payment collection, false statements and public corruption.

One case concerns apparent self-dealing by one of the private fund managers Treasury picked to buy bad assets from banks at discounted prices. A portfolio manager at the firm apparently sold a bond out of a private fund, then repurchased it at a higher price for a government-backed fund.

A rating agency had just downgraded the bond, so it likely was worth less, not more, when the government fund bought it. The company is not being named pending the outcome of Barofsky's investigation.

Treasury said it welcomed Barofsky's oversight but resisted the call to ? new barriers against conflicts of interest. The new rules "would be detrimental to the program," Treasury spokeswoman Meg Reilly said in a statement. The existing compliance rules "are a rigorous and effective method of protecting taxpayers," she said.

"As the report says, 'for various reasons, Treasury has decided that requiring such walls 'is simply not practical in the context of PPIP,' and has refused to adopt this recommendation. It is disappointing but not unsurprising that the Treasury Department under the leadership of Secretary (Tim) Geithner is once again stonewalling transparency," Issa said.

"Frankly, just because it may be inconvenient is not a good enough excuse to justify leaving taxpayer dollars vulnerable to manipulation and fraud," he continued.

Much of Barofsky's report focused on the government's growing role in the housing market, which he said has increased the risk of another housing bubble.

Over the past year, the federal government has spent hundreds of billions propping up the housing market. About 90 percent of home loans are backed by government controlled entities, mainly Fannie Mae, Freddie Mac and the Federal Housing Administration.

The Federal Reserve is spending $1.25 trillion to hold down mortgage rates, and millions of homeowners have refinanced at lower rates.

"The government has stepped in where the private players have gone away," Barofsky said in an interview. "If we take government resources and replace that market without addressing the serious (underlying) concerns, there really is a risk of" artificially pushing up home prices in the coming years.


The report warned that these supports mean the government "has done more than simply support the mortgage market, in many ways it has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor."

Barofsky's report echoed concerns raised by housing experts in recent months, as home sales and prices rebounded. They warn that the primary reason for the turnaround last year has been billions of dollars in federal spending to lower mortgage rates and prop up demand.

Once that spigot of cash is turned off, they caution, the market will be vulnerable to a dramatic turn for the worse. Daniel Alpert, managing partner of investment bank Westwood Capital, wrote in a report that national home prices are bound to fall 8 to 10 percent below the lows of last spring.

"The lion's share of the remaining decline will occur in markets that saw sizable bubbles but have not yet retrenched," he wrote.

Officials from the Obama administration counter that massive federal intervention has helped the housing market stabilize and prevented more dire consequences.

Barofsky's report also disclosed that, while the Obama administration has pledged to spend $75 billion to prevent foreclosures, only a tiny fraction -- just over $15 million -- has been spent so far. Under the Making Home Affordable program, only about 66,500 borrowers, or 7 percent of those who signed up, had completed the process as of December.

He said the key to preventing future crises is to reform Fannie Mae and Freddie Mac, create and improve loan underwriting and supervision of banks. He stopped short of endorsing specific proposals for overhauling financial regulation, but said many of the proposals would go far to improving the system.

http://www.foxnews.com/politics/2010/01/31/watchdog-bailouts-created-risk/



I've been saying this for how long now? It's called moral hazards. This so called bailout was the biggest con in U.S. History. Yall ? keep on with that "If we wouldn't have done it, it would have been worse" GTFOH. Trust this, the worst has yet to come.

Comments

  • perspective@100
    perspective@100 Members Posts: 1,862 ✭✭✭✭
    edited February 2010


    I've been saying this for how long now? It's called moral hazards. This so called bailout was the biggest con in U.S. History. Yall ? keep on with that "If we wouldn't have done it, it would have been worse" GTFOH. Trust this, the worst has yet to come.

    I feel what you saying, but had they not bailed out those huge banks they would have gone under. Presumably it would have created a domino effect of banks going under by people rushing to the banks to pull their money out. The banking system is vital in any economy no matter how ? it is, lol
  • bornnraisedoffCMR
    bornnraisedoffCMR Members Posts: 1,073 ✭✭
    edited February 2010
    I feel what you saying, but had they not bailed out those huge banks they would have gone under. Presumably it would have created a domino effect of banks going under by people rushing to the banks to pull their money out. The banking system is vital in any economy no matter how ? it is, lol

    This what they would have you beleive. The same people that said before the collapse that "the housing market will continue to go up" and "Fannie and Freddie are fundamentally sound" said "If we dont bail them out, it will wipe out everybody"

    Its ? man, dont believe the hype. We should have let the chips fall where they may. Also these companies are being propped by the government, and it serves no body justice.

    You want to know what would have happened? AIG, Goldman, and all these companies would have went out of business and it would have taught the industry that you dont go gambling with people's money. Everyone there would have gotten pink slips instead of bonuses, and they would be out of business? Does that mean banking will be over? Of course not, smaller and more responsible companies would then have to opportunity to expand, and help rebuild the economy in a more sounder way, instead of playing around in the mortgage backed securities markets. We've set a terrible precedent and now the banks that were "too big to fail" are even bigger. This was the biggest con in U.S. history.

    Banking is a very simple operation but government, the Federal Reserve, and corporatism has made it to where it now has to be subsidized by the tax payer.
  • perspective@100
    perspective@100 Members Posts: 1,862 ✭✭✭✭
    edited February 2010
    Say you had about 20 stacks in the bank and you see some huge banks go bankrupt. That means people with their money in the bank just lose out no refund no nothing. You going to risk keeping your money in a bank? I'm not... Thats life savings you willing to risk like a Poker wager when you dont have to. Just snatch it out and you good... Like I said I feel what you saying but when it come to money most people ain't going to take too many chances.
  • bornnraisedoffCMR
    bornnraisedoffCMR Members Posts: 1,073 ✭✭
    edited February 2010
    say you had about 20 stacks in the bank and you see some huge banks go bankrupt. That means people with their money in the bank just lose out no refund no nothing. You going to risk keeping your money in a bank? I'm not... Thats life savings you willing to risk like a poker wager when you dont have to. Just snatch it out and you good... Like i said i feel what you saying but when it come to money most people ain't going to take too many chances.

    fdic...........
  • Swiffness!
    Swiffness! Members Posts: 10,128 ✭✭✭✭✭
    edited February 2010

    We should have let the chips fall where they may. Also these companies are being propped by the government, and it serves no body justice.

    You want to know what would have happened? AIG, Goldman, and all these companies would have went out of business

    ....and Bank of America and Wachovia and JP Morgan and Citigroup and Wells Fargo and Mellon and Citizens and....


    See this will always be my beef w/ your crowd, CMR. You seriously act like ? would be SWEET had no bailout occurred. Don't lie to a ? and insult his intelligence. Be real. Tell me "Yes, mad banks would fall like dominoes, yes the entire fiancial sector would have a huge meltdown, but it would be better in the long run". Don't be like "If we never did the bailouts, the economy would be fine, no other banks would collapse and unemployment would be 4%. Plus we'd all get to smash Megan Fox raw".
  • Swiffness!
    Swiffness! Members Posts: 10,128 ✭✭✭✭✭
    edited February 2010
    fdic...........

    Which as I recall, you think shouldn't exist.
  • bornnraisedoffCMR
    bornnraisedoffCMR Members Posts: 1,073 ✭✭
    edited February 2010
    It's shouldn't, it's one of the driving forces behind this crisis, but, with that said it would have prevented the bank runs that perspective is talking about. I would have much rather the govt bailing out depositors rather than Fortune 100 corporations.
  • bornnraisedoffCMR
    bornnraisedoffCMR Members Posts: 1,073 ✭✭
    edited February 2010
    Swiffness! wrote: »
    ....and Bank of America and Wachovia and JP Morgan and Citigroup and Wells Fargo and Mellon and Citizens and....


    See this will always be my beef w/ your crowd, CMR. You seriously act like ? would be SWEET had no bailout occurred. Don't lie to a ? and insult his intelligence. Be real. Tell me "Yes, mad banks would fall like dominoes, yes the entire fiancial sector would have a huge meltdown, but it would be better in the long run". Don't be like "If we never did the bailouts, the economy would be fine, no other banks would collapse and unemployment would be 4%. Plus we'd all get to smash Megan Fox raw".

    I never said ? would have been sweet. ? would have been horrible for a couple months, year MAX. But there would have been a major bounce back in REAL prosperity. Not this made up ? that we have now. A ? JOBLESS RECOVERY???? THATS NOT A ? RECOVERY SWIFF!!! I dont care how much the governments ? GDP goes up, the economy is getting sicker.

    Its just like a drug addict. You can keep on hittin the pipe, you'll feel good, but you know your going to end up dead. Are you can suck it up and take the short term pain for the long term gain. What we are trying to do is make it seem like everything is peaches and cream when it aint, and we are just postponing the inevitable. You'll see bruh, when you wake up one morning and you see 25% unemployment, 8 dollar gas, and pay 20 dollars for a loaf of bread you gonna say, Damn, CMR was right.
  • Swiffness!
    Swiffness! Members Posts: 10,128 ✭✭✭✭✭
    edited February 2010
    I never said ? would have been sweet. ? would have been horrible for a couple months, year MAX. But there would have been a major bounce back in REAL prosperity. Not this made up ? that we have now. A ? JOBLESS RECOVERY???? THATS NOT A ? RECOVERY SWIFF!!! I dont care how much the governments ? GDP goes up, the economy is getting sicker.

    No YOU didn't say it would be peaches and cream but that's what the fake fiscal conservative ? to your Right like to fantasize about. The same dudes who say things like "We can cover the uninsured without spending billions" and "Entitlement spending is killing us, but DON'T TOUCH MEDICARE" and the world famous "WE NEED TO CUT SPENDING NOW!!!.....but let's keep increasing the defense budget". You know who I'm talking about....Republicans.

    And there would be a "major bounce back"? OF COURSE there will be a "bounce back" when the entire ? system implodes and the Dow is at like, 2,000. There's nowhere to go but up when you hit ROCK BOTTOM. You really think the job situation would be BETTER in a "Dead Cat Bounce Recovery"? HA, my ? . HA.

    btw, the reason the "hands off" approach to economic calamity, the approach you advocate, will NEVER, EVER be implemented in any kind of democratic society, is because "the masses" will ALWAYS demand their leaders "do something" in such a situation. ALWAYS. You think people is mad now??? How much madder would they be if the perception was that the Gov't just LET the ? go to hell? Ask President Hoover bout dat. The Average American doesn't know what the ? a "Milton Friedman" is.

    Oh and from the article, it seems like Barofsky's attitude is Pro Volcker Plan. Obama will be lucky if he doesn't get picked off by a Goldman Sachs sniper for supporting Volcker's approach. Fact.

    And I ain't buyin no more precious metals. ? is a bubble of its own, fed by right wing talk show hosts.
  • bornnraisedoffCMR
    bornnraisedoffCMR Members Posts: 1,073 ✭✭
    edited February 2010
    Swiffness! wrote: »
    No YOU didn't say it would be peaches and cream but that's what the fake fiscal conservative ? to your Right like to fantasize about. The same dudes who say things like "We can cover the uninsured without spending billions" and "Entitlement spending is killing us, but DON'T TOUCH MEDICARE" and the world famous "WE NEED TO CUT SPENDING NOW!!!.....but let's keep increasing the defense budget". You know who I'm talking about....Republicans.

    And there would be a "major bounce back"? OF COURSE there will be a "bounce back" when the entire ? system implodes and the Dow is at like, 2,000. There's nowhere to go but up when you hit ROCK BOTTOM. You really think the job situation would be BETTER in a "Dead Cat Bounce Recovery"? HA, my ? . HA.

    btw, the reason the "hands off" approach to economic calamity, the approach you advocate, will NEVER, EVER be implemented in any kind of democratic society, is because "the masses" will ALWAYS demand their leaders "do something" in such a situation. ALWAYS. You think people is mad now??? How much madder would they be if the perception was that the Gov't just LET the ? go to hell? Ask President Hoover bout dat. The Average American doesn't know what the ? a "Milton Friedman" is.

    Oh and from the article, it seems like Barofsky's attitude is Pro Volcker Plan. Obama will be lucky if he doesn't get picked off by a Goldman Sachs sniper for supporting Volcker's approach. Fact.

    And I ain't buyin no more precious metals. ? is a bubble of its own, fed by right wing talk show hosts.

    I dont have a problem with the Volker rule, but Goldman will get around it easilly. All they need is a few depositors, case closed.

    You said, the hands off approach will never be implemented, go take a look at the Recession of 1921. Its the post FDR generations that feel like The State needs to save us anytime ? gets a little rough....when it's usually the State that has got us into the mess.

    And you dont have to lecture me about the Neo-Cons, I've always said the GOP is the best thing that ever happened to the progressive movement, because the GOP is ? stupid and doesn't even understand what they say. They just say the opposite of whatever the Dems are saying. They are talking all this free market, dollar bust, deficit hawk ? now, but they were mute under Bush. I have no respect for them. I have no respect for any of the politicians. But then again, I dont look to the State to save me.
  • perspective@100
    perspective@100 Members Posts: 1,862 ✭✭✭✭
    edited February 2010
    fdic...........

    Oh yeah, the each depositor is insured up to 100,000 dollar people. You thing Ni99as going to wait for that money to be given back to them? Nope....withdrawl
  • Swiffness!
    Swiffness! Members Posts: 10,128 ✭✭✭✭✭
    edited February 2010
    You said, the hands off approach will never be implemented, go take a look at the Recession of 1921. Its the post FDR generations that feel like The State needs to save us anytime ? gets a little rough....when it's usually the State that has got us into the mess.

    Well the '21 deal was caused by a World War. FDR is the reason Americans expect their Presidents to get ? done as if they own the Infinity Gauntlet, btw. But my point is less about policy and more about human nature. And how impatient modern Americans are. I mean, we get ? off at the microwave for taking too long.
    you dont have to lecture me about the Neo-Cons

    Yeah, I know. Couldn't help myself from taking a swipe at those ? . I pray for the day when you and the Tom Ridges/Ron Pauls take back the GOP from ? "Deficits Don't Matter" Cheney and Roger Ailes. Probably won't happen in my lifetime. They're too caught up in abortion and hating Muslims/? /Mexicans/etc.
  • janklow
    janklow Members, Moderators Posts: 8,613 Regulator
    edited February 2010
    Swiffness! wrote: »
    ...and the world famous "WE NEED TO CUT SPENDING NOW!!!.....but let's keep increasing the defense budget". You know who I'm talking about....Republicans.
    in fairness, this one also applies to the Democrats who have that defense funding going to their districts. you know, the guys complaining about defense cuts Obama/Gates support?
  • bornnraisedoffCMR
    bornnraisedoffCMR Members Posts: 1,073 ✭✭
    edited February 2010
    Oh yeah, the each depositor is insured up to 100,000 dollar people. You thing Ni99as going to wait for that money to be given back to them? Nope....withdrawl

    250, 000 and it's immediately avaliable. LOL, what? You think they actually drive up in trucks full of money? No ? , the simply apply the allotted credit to the bank accounts. It's all done with computers.

    And you also act as if banks did not fail since the bailout. New Flash: Hundreds of banks have failed and still are failing. ? , 15 so far for 2010!

    http://www.thestreet.com/story/10670679/1/six-banks-fail-2010-tally-at-15.html?cm_ven=GOOGLEN
  • perspective@100
    perspective@100 Members Posts: 1,862 ✭✭✭✭
    edited February 2010
    250, 000 and it's immediately avaliable. LOL, what? You think they actually drive up in trucks full of money? No ? , the simply apply the allotted credit to the bank accounts. It's all done with computers.

    And you also act as if banks did not fail since the bailout. New Flash: Hundreds of banks have failed and still are failing. ? , 15 so far for 2010!

    http://www.thestreet.com/story/10670679/1/six-banks-fail-2010-tally-at-15.html?cm_ven=GOOGLEN

    Thats wassup, but these banks failing getting bought out too, I just cant see multiple huge banks being bought by smaller ones... Hell my original bank been bought out three times since 2000. Those banks been failing too, I heard about them Georgia Banks going down last year. It was only a matter of time... To answer your question, No I dont think they drive up in trucks would be nice though. Just figure there is paper work procedures to follow and some sort of waiting period like everthing else in the world. Never really seen the immediate process actually executed in a flawless manner. Maybe its just me but i'm yanking my money ? that ? ....
  • bornnraisedoffCMR
    bornnraisedoffCMR Members Posts: 1,073 ✭✭
    edited February 2010
    Thats wassup, but these banks failing getting bought out too, I just cant see multiple huge banks being bought by smaller ones... Hell my original bank been bought out three times since 2000. Those banks been failing too, I heard about them Georgia Banks going down last year. It was only a matter of time... To answer your question, No I dont think they drive up in trucks would be nice though. Just figure there is paper work procedures to follow and some sort of waiting period like everthing else in the world. Never really seen the immediate process actually executed in a flawless manner. Maybe its just me but i'm yanking my money ? that ? ....

    The larger banks would get bought out, that basically what we (the tax payer) did, but we gave them ? 100 cents on the dollar!! That's not a deal.
  • perspective@100
    perspective@100 Members Posts: 1,862 ✭✭✭✭
    edited February 2010
    The larger banks would get bought out, that basically what we (the tax payer) did, but we gave them ? 100 cents on the dollar!! That's not a deal.

    Thats some true ? there... real talk