Dylan Ratigan Show   |  March 29, 2011

Rating the successes and failures of TARP

TARP Special Inspector General Neil Barofsky shares some parting thoughts on the bailout program.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> we're back with new evidence of a housing market in crisis. again, we have two crises in this country, unemployment and houses, and they're tied directly together. creates the budget shortfall that say we talk about so much. and home prices are sliding in 19 of the 20 cities tracked, they are barely above reinvestigation from the '06 peak and this dire report comes the same day the house will consider ending the president's troubled homeowner assistance program which has helped the banks space out the foreclosures but has helped very few homeowners. in fact it has been widely criticized for failing to help keep the millions in their homes it was supposed to, simply help smooth out the earnings for the banks who could roll out the foreclosures over the period of a few quarters. the program was created with about $50 billion from the highly unpopular t.a.r.p. program which bailed out the banks at taxpayers' expense. ironically some of the biggest critics of the t.a.r.p. program were the one who say oversaw it, which includes outgoing special inspector general neil barofsky. he joins us from washington, d.c. from what we will call his exit interview . the man so critical of the bailouts is bailing out. which is just fun to say if nothing else, neil . where do we stand in the level of unprosecuted potential criminal or civil activity and current risk in the financial system ?

>> well, with respect to to our investigations, we've charged more than 50 individuals civilly or criminally or helped obtain charges. we've convicted 18 people of criminal fraud. we have 150 something ongoing investigations, including more than 70 at financial institutions that either applied for or received t.a.r.p. funds. so we've had some great successes so far but there's a lot of work still left to go.

>> let's stop there for a second. of all those prosecutions, are any of them at the big banks themselves and do any of them go to the ceo level or the board of directors level and go to the direct issue of accounting fraud in misrepresentation of these mortgage assets in the investment market?

>> well, sure. for example, we have a trial starting, i think, just next week or two against lee fargus, the chairman of taylor bean and whitaker. that's a multi billion dollar accounting fraud that is mortgages and mortgage-backed securities. there's been a number of guilty pleas in that case already. our jurisdiction is really only those related to the t.a.r.p. and the t.a.r.p. program, and that program we have jurisdiction because they tried to get more than $550 million from t.a.r.p., which we were able to stop dead in its tracks and save that taxpayer money. and we've had criminal charges against a number of ceos of smaller banks as well.

>> where do we stand with the big banks , jpmorgan, citigroup, goldman sachs , wells fargo , those who are really dealing in huge volumes of mortgage-backed securities that were clearly not compliant with the rating that was bowing given to them by the rating agency , which at the time was aaa.

>> with respect to those agencies we would only have jurisdiction to investigate into t.a.r.p.-related crimes, not the time of activity that predated t.a.r.p. and wouldn't have anything to do with their t.a.r.p. applications, so that really would be outside of our jurisdiction.

>> and that would be department of justice ?

>> department of justice , u.s. attorney 's office, sure.

>> i'll leave that one alone. what is the current risk in the system as it stands right now in your opinion?

>> i think we're at a very dangerous place. the risk is very high. the largest banks that we were just talking about since the financial crisis have generally gotten larger, about 20% larger. they're bigger, they're more interconnected than before, more systemically connected than before. and notwithstanding the authorities and powers that the regulators have to deal with this problem, they're simply not going to do it. they're not going to use the power they have to reanyoin our largest banks .

>> why are you concerned they won't do that.

>> the oversight council which is cared by tim geithner who has been advocating that the tools be used is sheila bahe and she's stepping down in a few months and no one else seems to be picking up the mantle and challenge she's thrown down to effectively use these tools to help shrink and simplify these way-too- big fm institutions that are a threat to our system.

>> who would you suggest that journalists like myself and americans who are concerned about this issue, as you leave, sheila is leaving, tim geithner is still very much in place. who should we look to in the government, ted kauffman is obviously gone from the senate, to advocate the rational voice of fairness against the corrupting influence of the banks culture in washington, d.c.?

>> well, i'm stepping down but they will continue to go forward with the important work we have to do. it hasn't been settled who my replacement is going to be but hopefully it will be someone who will pick up the reins and bow an advocate for the taxpayer and bring transparency and accountability to these issues. i might be stepping down, but i'm not going anywhere.

>> before i let you go, there was an unnamed treasury official, another leaker of some kind to the " washington post " saying the news of barofsky's resignation was like a nice valentine to us. do you take that as a compliment?

>> absolutely. i'd like to send that person a thank you note. if anything could better depict both the effectiveness that we've had as far as overseeing treasury and unfortunately the juvenile reaction that they have to our oversight, it's pretty much encapsulated right there. so i do take that as a compliment. if they were -- if there were tears being shed about my departure, it means i wasn't doing my job.

>> well, we look forward to discussing whatever is going on in the world with you and we thank you for making yourself so available to us while you have served the country in the manner that you most recently have. thank you, neil .

>> thank you, dylan.