Barofsky Discovers The Bailout Was Based On A Big, Fat Lie

[notesdev]

At the heart of the clash between TARP watchdog Neil Barofsky and his critics in the Obama administration is that Barofsky thinks that the bailout should be publicly accountable for meeting its public goal: Keeping banks lending money to fuel the economy.

The Treasury Department, meanwhile, is happy with the secret goal--recapitalizing banks and consolidating weak banks with stronger ones.

This dichotomy is vividly portrayed in this essay by Glen Greenwald:

Barofsky wants to compel banks to account for those funds and then publicize that information, while the administration opposes such efforts, claiming that accounting for TARP monies is impossible due to the "fungibility" of those funds. To disprove that claim, Barofsky sent out voluntary surveys to the bank which proved that those funds could be tracked (and he found TARP funds were being used by receiving banks largely to acquire other institutions and/or create "capital cushions" rather than increase lending activity, the principal justification for TARP).

Now it's been obvious to many of us for quite some time that financially unhealthy banks would never use the TARP money for anything but hoarding, paying bonuses and trying to prop themselves up. But that's because we're as cynical as the architects of the TARP. Barofsky, a career prosecutor, takes the entirely reasonable view that government programs shouldn't be based on lies.

...

the rest of the story:


http://www.businessinsider.com/barofsky-discovers-the-bailout-was-based-on-a-big-fat-lie-2009-7

[nashville_brook]

1. what could have been done? LET THEM FAIL... more from the article...

On a deeper level, what Barofsky is running into is a core problem with the way the TARP was designed. There's simply no way the government could use capital injections to spur lending into a recessionary economy. It was bound to be used to increase capital cushions. And that's because the Treasury Department and the Federal Reserve simply lacked the political imagination to find a way to shore up the financial system without propping up zombie banks.

What else could they have done? Very simply, we could have allowed failing firms to fail, wiped out shareholders, devastated bondholders, seized depositor assets, perhaps while increasing liquidity to make sure healthy financial institutions had enough cash on hand to deal with any panic.

[gorfle]

2. Lending won't work anyway.

At the heart of the clash between TARP watchdog Neil Barofsky and his critics in the Obama administration is that Barofsky thinks that the bailout should be publicly accountable for meeting its public goal: Keeping banks lending money to fuel the economy.

We are not going to be able to lend or borrow our way out of this economy. The economy does not need more debt. It needs more wealth.

[glitch]

3. It doesn't need more wealth, it needs wealth redistribution.

And that redistribution can't be through increasing debt.

[truedelphi]

4. How in the world did it come to pass that Obama appointed Barofsky?

It seems like every other appointee is a crook and a liar and has ties to Goldman Sachs.

But since he did appoint him, and since he is the only one standing Up for We The People, maybe the President should listen to him?

For once, he would be listening to an honest man -- or is that type of listening to "fingible" to the Administration?

[truedelphi]

5. The article states this:

What else could they have done? Very simply, we could have allowed failing firms to fail, wiped out shareholders, devastated bondholders, seized depositor assets, perhaps while increasing liquidity to make sure healthy financial institutions had enough cash on hand to deal with any panic.


Why couldn't we just do what our nation did during the eighties? Once we realized we needed to do something about the S & L crisis? Also the legislation for that crisis is still on the books. In following this legislation. We simply would have allowed the Bailouts to be offered not to the scumbag top banks that caused the problem, but to smaller regional savings and loans, and each state would appoint one bank for each of the designated regions. Lending could have begun immediately and loans to small businesses would now be being made!

ONE DOWNSIDE: Of course doing the BailOuts this way would not have helped Goldman Sachs nearly as much!!

Instead we are hearing about how difficult it is to get a loan - even with the best credit rating that exists. Well of course it is difficult - the money has been hoarded by the Big Players, and they are not about to ruin it for themselves by dispersing it down to the Common Person.

Even though it is the Common Person's economy that has been ruined by the excessive amounts of these Bailouts. With more ruin to follow in the wake of Hyper Inflation.