Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street [Hardcover]

Neil Barofsky (Author)

Book Description

Release date: July 24, 2012

In this bracing, page-turning account of his stranger-than-fiction baptism into the corrupted ways of Washington, Neil Barofsky offers an irrefutable indictment, from an insider of the Bush and Obama administrations, of the mishandling of the $700 billion TARP bailout fund. In vivid behind-the-scenes detail, he reveals proof of the extreme degree to which our government officials bent over backward to serve the interests of Wall Street firms at the expense of the broader public—and at the expense of effective financial reform.

During the height of the financial crisis in 2008, Barofsky gave up his job as a prosecutor in the esteemed U.S. Attorney’s Office in New York City, where he had convicted drug kingpins, Wall Street executives, and perpetrators of mortgage fraud, to become the special inspector general in charge of oversight of the spending of the bailout money. From his first day on the job, his efforts to protect against fraud and to hold the big banks accountable for how they spent taxpayer money were met with outright hostility from the Treasury officials in charge of the bailouts.

Barofsky discloses how, in serving the interests of the banks, Treasury Secretary Timothy Geithner and his team worked with Wall Street executives to design programs that would funnel vast amounts of taxpayer money to their firms and would have allowed them to game the markets and make huge profits with almost no risk and no accountability, while repeatedly fighting Barofsky’s efforts to put the necessary fraud protections in place. His investigations also uncovered abject mismanagement of the bailout of insurance giant AIG and Geithner’s decision to allow the payment of millions of dollars in bonuses—including $7,700 to a kitchen worker and $7,000 to a mail room assistant—and that the Obama administration’s “TARP czar” lobbied for the executives to retain their high pay.

Providing stark details about how, meanwhile, the interests of homeowners and the broader public were betrayed, Barofsky recounts how Geithner and his team steadfastly failed to fix glaring flaws in the Obama administration’s homeowner relief program pointed out by Barofsky and other bailout watchdogs, rejecting anti-fraud measures, which unleashed a wave of abuses by mortgage providers against homeowners, even causing some who would not have lost their homes otherwise to go into foreclosure. Ultimately only a small fraction (just $1.4 billion at the time he stepped down) of the $50 billion allocated to help homeowners was spent, while the funds expended to prop up the financial system—as Barofsky discloses—totaled $4.7 trillion. As Barofsky raised the alarm about the bailout failures, he met with obstruction of his investigations, and he recounts in blow-by-blow detail how an increasingly aggressive war was waged against his efforts, with even the White House launching a broadside against him. Bailout is a riveting account of his plunge into the political meat grinder of Washington, as well as a vital revelation of just how captured by Wall Street our political system is and why the too-big-to-fail banks have only become bigger and more dangerous in the wake of the crisis.

***

FROM BAILOUT

The further we dug into the way TARP was being administered, the more obvious it became that Treasury applied a consistent double standard. In the late fall of 2009, as I began receiving the results of two of our most important audits, the contradiction couldn’t have been more glaring. When providing the largest financial institutions with bailout money, Treasury made almost no effort to hold them accountable, and the bounteous terms delivered by the government seemed to border on being corrupt. For those institutions, no effort was spared, with government officials often defending their generosity by kneeling at the altar of the “sanctity of contracts.” Meanwhile, an entirely different set of rules applied for home- owners and businesses that were most assuredly small enough to fail.

Nowhere was the favoritism toward Wall Street more evident than with the government’s approach to AIG, where inviolable contract terms were cited to justify the absurd executive bonus payments as well as far richer payouts provided to the megabank counterparties to AIG’s CDS deals, honoring even their most reckless bets. For homeowners and small business owners, though, contracts went from being sacrosanct to inconvenient irrelevancies. So when mortgage servicers blatantly disregarded HAMP contracts by trampling over homeowners’ rights, Treasury turned to an endless series of excuses to justify its refusal to hold them accountable. Similarly, for more than two thousand auto dealerships, Treasury’s auto bailout team sought to void the contractual rights granted them under state franchise laws to shut them down.

Editorial Reviews

Review

“Bailout is a jaw-dropping play-by-play of how the Treasury Department bungled the financial bailouts… With a prosecutor's logic and copious footnotes, Barofsky makes it clear things are rarely what they seem in Washington.” (USA Today)

“[Bailout] is an interesting behind-the-scenes account of how Washington tried to save the economy… [and] an enjoyable tale of how a prosecutor of Colombian drug gangs got drafted for the thankless task of policing a $700 billion bailout from a dank basement office of the Treasury.” (Fortune )

“[An] everyman account of the pervasive cynicism and insider-dealing of the D.C. establishment.” (The American Spectator)

“[One] of our favorite business books so far this year…The former special inspector general policing the $700 billion Troubled Asset Relief Program lifts the lid on the U.S. Treasury and settles scores… [an] illuminating memoir.” (Bloomberg Businessweek)

“A damning indictment of the Obama administration's execution of the TARP program.” (Washington Examiner)

“A quick, intense, read.” (Business Insider)

“[Barofsky] set out to account for the TARP spending in a transparent, nonpartisan manner. However, as he demonstrates in his energetically written first-person account, he and his staff met resistance every time they tried to share the truth with Congress, the White House and the American public… a courageous, insightful book that offers no cause for optimism.” (Kirkus (starred review))

“Blistering in its assessment of the Treasury Department's handling of the bailouts.” (Huffington Post)

“In his scathing new book, Barofsky says taxpayers got shafted while the rich got richer… a true expose…. Taxpayers who feel helpless in the midst of the extended economic recession are likely to feel energized to metaphorically blow up the system after reading Barofsky’s account.” (St. Louis Post-Dispatch)

“[An] explosive account of the mishandling of the Troubled Asset Relief Program funds.” (Fort Worth Star-Telegram)

About the Author

Neil Barofsky served as the Special Inspector General in charge of overseeing TARP (Troubled Asset Relief Program) from December 2008 until March 2011. For eight years prior, he was a federal prosecutor in the US Attorney’s Office for the Southern District of New York, during which time he headed the Mortgage Fraud Group. Currently, Neil Barofsky is a senior fellow at New York University School of Law. An alum of the University of Pennsylvania and the New York University School of Law, this is his first book.

Product Details

• Hardcover: 288 pages
• Publisher: Free Press (July 24, 2012)
• Language: English
• ISBN-10: 1451684932
• ISBN-13: 978-1451684933
• Product Dimensions: 6.3 x 1 x 9.2 inches
• Shipping Weight: 11.4 ounces (View shipping rates and policies)
• Average Customer Review: 4.5 out of 5 stars  See all reviews (194 customer reviews)
• Amazon Best Sellers Rank: #27,043 in Books (See Top 100 in Books)
  • #63 in Books > History > Americas > United States > 21st Century
  • #66 in Books > Politics & Social Sciences > Politics & Government > Public Affairs & Policy > Economic Policy
  • #68 in Books > Business & Investing > Economics > Economic Policy & Development

Most Helpful Customer Reviews

168 of 189 people found the following review helpful

5.0 out of 5 stars "The American People Should Lose Faith in their Government." July 24, 2012

By James R. Holland TOP 1000 REVIEWERVINE™ VOICE

Format:Hardcover

In the last couple of months, I've read and reviewed another book by a former Goldman Sacks banker who also thought the Wall Street banks had gone to heck in a hand basket. In his book, "Survival Investing: How to Prosper Amid Thieving Banks and Corrupt Governments," John Talbott entitled one of the chapters "Corruption In The Banks" and another one "Only an Idiot Would Lend to a Sovereign Government." At that time I thought maybe that author was just spewing "sour grapes" over some unknown experiences in his own past. Not any more. This book by Neil Barofsky the Special Presidential Inspector General for TARP, makes it clear John Talbott's opinions of the mess corruption has made of the banking system was right on the mark.
In "Bailout" Neil Brofsky, who was in a position to know the facts, documents his own 19-month tenure trying to clean up some of the messes created by the much too cozy relationships between Wall Street and government. More importantly he points out that the government is so big that its a bureaucracy within bureaucracies that can't do anything but grow and spend more money. The only real cure would be to take meat clever to the bureacracy and cut it down to a size that might actually be able to serve the citizens of America.
This expose is clearly described and documented in a dozen chapters with titles such as "Fraud 101, Hank Wants to Make It Work, The Lapdog, the Watchdog and the Junkyard Dog, I Won't Lie for You, Drinking the Wall Street Kool-Aid, The worst Thing That happens, We Go Back Home, By Wall Street for Wall Street, Foaming the Runway, The Audacity of Math, The Essential $7,700 Kitchen Assistant, Treasury's Backseat Driver, Happy Endings" and an "afterword, and detailed Notes and Index section. Its easy, but maddening reading. It's a first-person memoir of the author's experiences working to help over-see the government's TARP program.
Barofsky had already had some experience with how Washington works from his successful investigations of FARC drug distribution cases. He summed it up in a conversation with one of his fellow agents in Bogotá. "I'll tell you what I learned from this whole thing. I will never, ever take a job in Washington. The people down there don't care about justice or protecting the United States. It's all about bullsh*t, ego, politics, turf, and credit. I had no idea at the time how wrong I was about myself and how right I was about Washington."
Senator Joseph Biden had already warned him about Washington. "Neil, you know what the biggest single hurdle is to enforcing the narcotics laws internationally?"
"What, Senator?"
"Not the traffickers. Not the corruption. The State Department. The United States State Department."
Once he was indeeed working in Washington he found more truths. Mainly, that most politicians and bureaucrats didn't have a clue or want to.
This entire book is filled with his disappointments with the United States Government. "Although the idea behind Inspector Generals was that they would be fiercely independent watchdogs. I soon learned that they were mostly just like any other government agency. As such their priorities were, in order of importance: maintaining and hopefully increasing their budget; giving the appearance of activity; and not making too many waves."
Even when offering to help his new department get organized all the other departments offering to help expected to be paid for their services and paid the absolute most money they could squeeze out of their fellow government departments. Saving tax payer money wasn't one of their goals.
While the author managed to provide some valuable information that saved the government more than $550 million dollars, sent several crooks to jail and pointed out many of the flaws in Dodd-Frank and other Treasury programs, he was depressed that once he left, the Treasury dismissed most of his warnings and ideas. There are so many specific details provided in this short memoir that the reader will have to actually read the book to find out more about them. One long quote in the book's afterword summed up much of what the author learned.
"I now realize that the American people should lose faith in their government. They should deplore the captured politicians and regulators who took their taxpayer dollars and distributed them to the banks without insisting that hey be accountable for how the bailout money was spent. They should be revolted by the financial system that rewards failure and protects the fortunes of those who drove the system to the point of collapse and will undoubtedly do so again. They should be enraged by broken promises to Main Street and the unending protection of Wall Street."
One of the more hopeful current events that encouraged the author was that both the Tea Party and some of the serious Occupy Wall Streeters see the obvious perils of the corruption that is rampant between much of Wall Street and its government regulators. There is hope for America when the public has begun to understand the dangers of such conspiracies. The government is too big and its only interested in protecting its turf, increasing its budget and covering its ass. The only real cure will be to cut away as much of the government fat as is humanly possilbe and many of the public servants that will need to do the clean-up aren't up to the job and their heart and personal career prospects preclude them from actually completing the task.
This is an interesting and enlightening page-turner written in such a way to make the very complicated and often boring financial material understandable. It's also a primer on why so little gets done in the Washington, D.C. It, like the Wall Street banks, is too big to be allowed to fail.

51 of 57 people found the following review helpful

5.0 out of 5 stars Whether homeowners were intentionally or unintentionally screwed July 27, 2012

By Citizen John TOP 50 REVIEWERVINE™ VOICE

Format:Hardcover

Neil Barofsky oversaw the $700 billion dollar TARP program as the Special United States Treasury Department Inspector General. Barofsky, a democrat, was appointed by Bush and saw no difference between that administration and the Obama administration with regard to their deferential treatment of the big banks.

No strings were attached to the money. Top bankers used it to pay record bonuses, among other things. The magnitude of riches bestowed upon these elites stirs the imagination of witnesses such as Barofsky, who can't seem to get over it. It was the largest single transfer of wealth in our nation's history.

This book demonstrates a deep and continuing bias to favor large banks, especially by the Treasury Department. It doesn't matter which party holds the administrative branch. Stated goals of giving money straight to the banks included to get lending going again. Yet nothing was done to tie money freely given to banks to any performance in lending. In large part because of this, foreclosures even now continue unabated and people cannot readily sell their homes yet.

Treasury Secretary Tim Geithner looks really bad in this book. He's basically portrayed as top squeezer of homeowners through concentrated use of deflation. Personally I didn't understand any motive for Geithner to deliberately squeeze families. Rather, I suspect the squeeze had to happen if the big bankers were to maximally benefit at the time. In other words, it seemed to me that homeowners were just in the wrong place and the wrong time, victims of the larger economic-political system.

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."

55 of 63 people found the following review helpful

5.0 out of 5 stars "BEHIND THE SCENES DETAILS ON HOW WALL STREET WAS SAVED!" July 24, 2012

By Geraldine Ahearn TOP 1000 REVIEWERVINE™ VOICE

Format:Hardcover

Neil Barofsky is a Senior Fellow at N.Y.U. School Of Law, a Special Inspector General, and a Federal Prosecutor who delivers information on the indictment of the Bush and Obama administrations in the mishandling of the $700 billion TARP bailout fund. A vivid, behind-the-scenes is given in detailed description as it portrays proof of the extreme degree to which government officials went out of their way to serve the interests of Wall Street firms at the expense of the public. In addition, the author presents information on the battle for fraud protection and the investigations conducted, and the responsibility upon Big Banks in the manner of spending taxpayer money. Also, facts are provided on effective financial reform. Educational and interesting and very important for all Americans to learn how these issues can affect both the economy and the welfare of our nation!