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They’re BAAAAACK: The CIT Takeover of OneWest Bank

john thainWow. I mean. Just, wow.

You gotta love these guys.

Two phrases came to mind when I read the headline today about CIT Group taking over OneWest Bank.

First: “History does not repeat itself, but it certainly does rhyme.”

And

Second: “Madness consists of doing the same thing over and over again and expecting a different result.”

The casual reader of financial headlines will neither recognize nor care about this acquisition by a middle-market business lender (CIT Group) of a California retail branch banking institution (OneWest).

But it’s not the relatively anonymous companies that matter, but rather the people behind the takeover, and the historical provenance of the companies, that matters. This acquisition involves some of the key chess pieces of the 2008 Crisis and the worst excesses of that time. Let me go through some of the key names and highlights.

 

OneWest Bank – This is really IndyMac bank with a new name.

“A rose, by any other name, would smell as sweet.”

You haven’t heard of IndyMac?

IndyMAC was kind of a ground zero mortgage lender in the 2007/2008 time period. Before failing, it was the seventh largest mortgage originator in the United States, and when it was taken over by the FDIC in July 2008 it was the fourth largest bank failure in history.

Of course it was originally founded by the later notorious Countrywide founder Angelo Mozilo, who spun off IndyMac as an independent company in 1997.

IndyMac did the usual thing as everyone else, borrowing with short-term debt, and lending out in the form of illiquid dicey mortgages.

IndyMac in particular was a leader in the intermediate “Alt-A” mortgage lending segment – mortgages too risky to be considered ‘Prime,’ but not entirely as shaky as Sub-prime either.

OneWest Bank became a newly formed bank in March 2009 when it took over the remains of IndyMac, via an FDIC auction of the failed mortgage lender.

Leading up to this transaction, the CEO of OneWest is Steve Mnuchin, a former Goldman Sachs partner and member of the management committee.

Prior to taking over OneWest, Mnuchin led Dune Capital with other Goldman partners who had made their reputations and fortunes investing in the distressed assets of the Resolution Trust Corporation, the government’s response to the Savings and Loan Crisis of the 1980s.

CIT Group – In February 2008, this lending company rang the New York Stock Exchange opening bell to celebrate its 100 years of existence. By April 2008 the company was reeling from losses, ceased its student loan lending, and subsequently its home-loan lending by the summer 2008. With billions in shareholder value destroyed, the company declared bankruptcy in 2009. In January 2010. CIT hired John Thain as Chairman and Chief Executive.

John Thain – Once heir-apparent to the CEO position at Goldman Sachs under Hank Paulson, Thain left Goldman in 2004 to run the New York Stock Exchange when current Goldman CEO Lloyd Blankfein got the clear nod to succeed Paulson. Thain took over the leadership of Merrill Lynch in late 2007, after Stanley O’Neal did his best to drive the old bull straight into a financial ditch through self-inflicted subprime CDO wounds, leading to a $8.4 Billion write-down.

Thain – to his credit – quickly raised $6 billion capital from the Singapore sovereign national fund, only to have to oversee close to another $10 Billion in write-downs in his first half year on the job.

By the Summer of 2008, Thain was forced to market Merrill’s toxic CDOs, offering them to – among others – Steve Mnuchin at Dune Capital, before selling them to Lone Star Capital at a severe discount.

With Merrill reeling by the end of 2008 – and with by then a total of close to $50 Billion in sub-prime mortgage CDO-related write-downs, Thain managed to sell Merrill to the only CEO who actually performed worse than O’Neal throughout the crisis, Ken Lewis from Bank of America.

Criticism of Thain 

Thain subsequently was criticized for:

a) Spending 1.2 million to decorate his executive suite, including his famous $1,000+ gold-plated wastebasket

b) Requesting a $10 million personal bonus from the Merrill Lynch board for saving all of their collective bacon, and

c) Paying out $4 Billion in bonuses to Merrill Lynch executives, just prior to the Bank of America takeover in January 2009, after the firm received $25 Billion in a direct US Treasury infusion of taxpayer money in October 2008.

All of which are fair grounds for accusing him of a touch of, shall we say, hubris. But from Merrill Lynch’s narrow perspective, John Thain was a motherflipping genius.

Thain is a genius, of a sort

Thain’s simultaneous saving of the venerable Merrill Lynch, and fleecing of Lewis and Bank of America’s shareholders in the midst of a financial meltdown is the single greatest sales job ever performed in financial circles.

Seriously. Ever.

But here’s the key point that links this financial history to Thain’s pursuit by CIT of OneWest Bank:

This greatest-sales-job-ever all would have been impossible if Thain’s former boss Treasury Secretary Hank Paulson had not guaranteed a $20 Billion sweetener for Ken Lewis to consummate the deal in January 2009.

Lewis apparently woke up from whatever drunken stupor had led him to acquire first Countrywide, and then Merrill Lynch, and Lewis tried to back out of the deal between December 2008 and January 2009.

Secretary Paulson ponied up $20 Billion in taxpayer first-loss money and jammed the deal through. Paulson could not afford, in the midst of the crisis (as well as Presidential transition) to have Merrill Lynch dropped by Bank of America, and very likely, bankrupted.

 Some other relevant facts

Also, coincidentally, his direct protégé from his Goldman CEO days ran Merrill Lynch at the time. Anyway. Not completely off-point, Thain reportedly earned $83.1 million from Merrill Lynch during his service from December 2007 to January 2009. Anyway.

Thain was a hero for Merrill in December 2008, but crucially could not have pulled off his magic trick had Merrill not been Too Big To Fail. And THAT, my friends, is what this CIT takeover is about.

And Thain has said that as plainly as possible.

CIT, under Thain, wants desperately to be Too Big To Fail

In recent months Thain has talked about whether CIT would pursue a bank acquisition. The additional safe deposits would be nice for CIT, Thain has said, but the key to CIT’s next purchase would be to get well above the threshold of $50 Billion in assets. Why does that matter? Because $50 Billion is currently the cutoff for becoming a “systemically important financial institution, or SIFI.

As the Wall Street Journal reports

On a conference call, Mr. Thain said he believes CIT is ‘well-positioned to satisfy all of the criterion or being a SIFI institution.

And as the Wall Street Journal further reports,

The takeover of IMB Holdco LLC, which is OneWest’s parent company, will bump CIT’s assets up to $67 billion, making the bank large enough to be considered ‘systemically important’ by regulators. CIT, a lender to small and medium-size businesses, had $44.15 billion in assets as of June 30.

 

SIFI, by the way, is what we now call Too Big To Fail institutions.

Ironically, becoming a SIFI should be considered a disadvantage, because it involves additional layers of regulatory scrutiny. In a normal, pro-business, capitalist financial system, we would expect that becoming a “SIFI” would be a “NoNo” for any bank.

Since 2009, regulators from the FDIC, SEC, Federal Reserve, CFTC (and any number of other acronymic bureaucracies) have been struggling with how to deal with Too-Big-To-Fail financial institutions.

Their answer: More regulations, more ‘living will’ requirements, more stress tests, more disclosures, more restrictions on proprietary trading, more capital requirements.

You’d think that any growing financial institution would run for its life, away from this type of bureaucratic morass.

Not CIT. Not Thain.

He knows first-hand how awesomely, personally, profitable it can be to run a massive private financial institution that has socialized any future losses because it’s a SIFI. Thain’s no dummy.

Steve Mnuchin, no slouch himself, will join the company as vice chairman and will join the board as well.

Please see some of the related posts:

 

In Praise of SIGTARP Part II – We blew it on the repayment of TARP

SIGTARP Part V – The AIG Debacle

 

Book Review of Bailout by Neil Barofsky

Book Review of Diary of a Very Bad Year by Anonymous Hedge Fund Manager

Book Review of Too Big To Fail by Andrew Ross Sorkin

 

Life After Debt: Putting the Band Back Together

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Book Review: Bailout; An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street

If every novel or Hollywood movie starts with either the premise of “A Man Walks Into a Town” or “A Man Goes On a Journey,” Bailout by Neil Barofsky begins with the former.  Neil Barofsky plays the leading Jimmy Stewart hero role in this modern update to Mr. Smith Goes To Washington.

In late 2008, the outgoing Bush administration nominated Barofsky, a federal prosecutor from the US Attorney General’s Office in New York, to head up the Special Investigator General of the Troubled Asset Relief Program (aka SIGTARP).  After then-Treasury Secretary Paulson pushed through Congress the approval of $700 Billion in government cheese dedicated to propping up the US financial system, Congress had the foresight to demand someone who could, in Barofsky’s turn of phrase, “catch the rats” inevitably attracted to the cheese.

Much of the humor and pathos of Bailout derives from Barofsky’s naïve outsider status[1] crashing awkwardly into – or exploding spectacularly against – the self-interested forces of Washington.  Time and again, he brings his moral outrage and laugh-or-you’ll-cry innocence to a self-interested, power hungry town.

He’s brutally harsh on well-known characters such as Treasury Secretary Tim Geithner[2], Paulson protégé Neil Kashkari[3], and Treasury deputy Herb Allison[4], as well as lesser known players who make up the DC financial policy world.  He’s also hilariously open about his own deficiencies for the SIGTARP job, in his role as a bridegreoom,[5] or as an initially clumsy political player on the Washington scene.

I’m not in the least surprised that I loved this book, as I’ve been a dedicated fan-boy[6] of Barofsky’s SIGTARP reports on this site (here, here, here and here), trying my hardest to make more people aware of how good and rare a job he did as SIGTARP.

I am surprised, however, at how much this book should be the book everyone reads to understand our federal government in the early 21st Century.  I’m not going to insist yet that Barofsky’s Bailout is the Washington DC version of Michael Lewis’ Liar’s Poker, but the parallels are strong enough that I’m putting the comparison into the conversation.

Both relate hilarious and cringe-inducing stories of ambitious, smart, successful, and powerful jerks acting badly, for personal gain, to the public’s detriment.  Both walked away from short stints in their respective centers of power with the guts to risk complete ostracism from that center of power by eviscerating the players in hilarious character sketches and painful interactions.

Throughout Bailout, Barofksy reminds us that the only possible way he could succeed as the Top Cop of TARP would be to act with complete indifference toward his next job.  Any personal consideration of the professional consequences of his actions – like money or advancement or power or prestige or making friends – would keep him from pursuing his investigatory role to its fullest extent.

It helps that Barofsky, by his own description, has an almost Aspergers-syndrome disregard for niceties like human feelings or sympathetic tones when they get in the way of what he believes to be right.  He exudes a super-hero focus on righteousness – even more than I had realized when I first dubbed him the Norse God of Financial Accountability.

If Barofsky demonstrates any character flaw in Bailout, it’s this same self-righteousness, his personal conviction that he’s got the right answers that nobody else except he (and his SIGTARP deputy Kevin Puvalowski[7]) had in Washington.  He mocks the Treasury creators of TALF[8] and PPIP[9] for not fully understanding the potential for fraud in these programs or flays them for pushing plans with overly Wall Street-friendly terms.

On the one hand I have no doubt Barofsky’s mostly right (and neither does Barofsky), but on the other hand we hear the righteousness in his voice that must have rubbed the sleep-deprived-and-making-it-up-as-they-went-along TARP bailout folks in the Treasury department the wrong way.

To nitpick a bit more, Barofsky tends not to give much credence to the Wall Street view of the world throughout Bailout.  As a former Wall Streeter, my own instinct tells me that simply ignoring Wall Street’s concerns in late 2008 and early 2009, and pursuing the purer prosecutorial approach seemingly favored by Barofsky, could have led to its own disastrous consequences as well.  I’m not happy with Paulson’s and Geithner’s coddling of the Street, but Barofsky’s hard line might not have been optimal for the public good in the long run either.

Overall though, I admire his consistent choice to be right over being liked, and his consistent choice to push public welfare over private advantage.

Why don’t more people go to Washington and do the right thing?  Barofsky clearly provides the answer: Because everybody is always looking to the next job.  You don’t uproot bad actors if those bad actors might actually help you get the next plum position.

At Bankers Anonymous I remain obsessed with the nexus of finance and politics that brought us to the brink of financial apocalypse in 2008.  Bailout isn’t the book for understanding the Wall Street side of the crisis, but it’s the best so far for understanding what deeply embedded conflicts of interest prevent government officials from doing the right thing to prevent a Credit Crisis.

Nothing I’ve seen shows any resolution of those conflicts of interest.

 

Please see related post: All Bankers Anonymous Book Reviews in one place.

 

 

[1] I have to admit his Mr. Smith Goes to Washington naiveté throughout the book has to be a bit of a pose, given that he’s a badass prosecutor who went after Colombian drug lords and white color financial criminals, experience which I imagine prepared him for interacting with the less savory aspects of human behavior.

[2] Barofsky argues that the original tax evasion problem that came up at Geithner’s confirmation hearing in 2009 illustrates Geithner’s basic disrespect for law and truthfulness.  Let’s just say that based on Bailout we should be glad to see the back of Treasury Secretary Tim Geithner in a second Obama administration.  I’m still going to be so pissed when Geithner announces he’s joining Goldman Sachs as senior partner upon leaving office next month.

[3] Barofsky grudgingly calls TARP architect Kashkari a reasonably straight-shooter.  I love this typical Barofsky backhanded compliment: “Sure, he was combative, not always forthcoming, and excessively deferential to Wall Street, but Kashkari had generally been straightforward with me.  I don’t think he ever flat-out lied to me, which in Washington put him into rarefied air.”

[4] The book’s forward alone, in which Barofsky relays Herb Allison giving him a classic drug-lord choice of “Gold or Lead” is worth the price of the book.  Barofsky sums up – with that one anecdote – everything you need to know about Washington DC in the 21st Century, and why people so rarely act for the public good when that conflicts with their private interest.  Allison opens his Gold-or-Lead proposals with “[Y]ou’re a young man, just starting out with a family, and obviously this job isn’t going to last forever.  Have you thought at all about what you’ll be doing next?”  When Barofsky professes only an interest in doing this job well, not focusing on the next job, Allison gets nastier, saying his tone is losing him credibility, people are talking badly about him.  Barofsky calls his bluff, after which Allison reverts to bribery again, asking him what kind of job he’d like?  An appointment?  A judgeship?  Basically anything to get Barofsky to play ball.

Powerful people worry too much about their potential next job to do the right thing in their current job.  In fact, the better-selling but largely uninteresting Andrew Ross Sorkin book Too Big To Fail suffers from precisely this problem.  Sorkin was too worried about enhancing his future journalistic career by protecting future sources such as the CEOs of Wall Street to criticize any of them in any interesting way.  Which is why the book should have been called Too Connected to Criticize.

[5] You have to love the story he tells on himself on the night of his own wedding rehearsal, unable to tear himself away from engaging over Blackberry in political fights with Treasury colleagues.  “Even when Karen tried to walk me through the drill for the ceremony, I couldn’t stop.  As she explained, ‘So we’ll come down this elevator and then walk down these stairs to this area, where we’ll have the ceremony,’ I responded, annoyingly, ‘Treasury is going to fight this.  Kevin’s right, they’re going to flip.  It’s going to shine a light in an area they want to keep dark.’  ‘And this is where the band will set up,’ Karen said, ignoring me and pointing out where the party would occur. ‘Treasury could just go out and tell the banks to respond with the ‘all money is green’ argument, and the banks will just say that they can’t respond to the request.  We’re going to have to get real specific in the subpoena,’ I blurted out, more to myself than her.  ‘This is where the buffet will be; we can taste some of the food tonight at dinner if you’d like,’ Karen placidly continued.  She very smartly refused to engage with my obsession, and she finally got some degree of peace after I walked into the pool with my Blackberry still clipped to my bathing suit, frying it.”

[6] For example, the post in which I named him the Norse God of Financial Accountability.

[7] Puvalowski is Barofsky’s buddy from the US Attorney’s office in New York who became his deputy at SIGTARP.

[8] Term Asset-Backed Securities Loan Facility.  A Federal Reserve program to lend public money to restart private investment in asset-backed securities after that portion of the market froze in the second half of 2008.  TALF proposed to provide loans of 95 cents on every private dollar invested, with non-recourse to the borrower.  For an introduction to some other non-recourse lending handouts from Washington to Wall Street, please read footnote #3 to this posting.

[9] Public-Private Investment Fund.  A Wall Street-friendly program providing 92 cents of federal funds for every dollar invested via PPIP to encourage private fund managers to purchase distressed assets off the balance sheets of big banks.  Also non-recourse to the borrower.  Again, see footnote #3 on this post for why that’s so awesome for Wall Street.

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SIGTARP, Part IV – What Small Banks Are Going Under Next?

Ok, so it’s no secret I’m pretty sweet on SIGTARP, the Norse God of Financial Accountability.

There’s the pleasure of calling a fellow US Treasury colleague a liar.

There’s the feistiness of a government official pointing out that through our failure to rein in TBTF banks, we’ve laid the groundwork for the next crisis

There’s the carefully balanced review of the Citigroup Bailout.

Frankly there’s the plain old fun of SIGTARP himself, Neil Barofsky, responding during his book tour[1] to my tweet about Geithner, unconcerned that Geithner would jump to Goldman, Sachs, because at least at GS he’d do less harm than as Treasury Secretary!

Barofsky’s response to my question about Geithner going to Goldman. “He could do less harm there.”

But I digress.  There’s a good deal of valuable information in SIGTARP reports, and in this installment I thought I’d highlight a few things we can learn about small and medium size banks.  I’m sad to say that four years after the Credit Crunch, many small and medium size banks are doing terribly.

US government regulators NEVER tell you which banks are in distress.[2]  But SIGTARP consistently goes where other regulators dare not tread.[3]  Read the full report to find out which small banks will go under next, probably by 2013, or simply go to the list of banks which have missed dividend payments.

On missing Dividend payments owed to Treasury for TARP money

The stated reason for TARP was to ensure that TBTF banks did not bring the entire financial system to a grinding halt when taken over by the FDIC or placed in receivership.  For less clear-cut reasons[4] however, Treasury also offered small and medium size banks a chance to take advantage of the fast-track route to recapitalization via government investment.

As it turns out, and despite explicitly forbidding this[5], the TARP money extended a lifeline to small and medium size banks that have failed to thrive following the Great Credit Crunch.  A few hundred of these banks have either succumbed to failure or have missed so many dividend payments to the Treasury that survival seems doubtful.

SIGTARP reports list not only those banks which have outright failed or those where the government has lost money, but also those banks that have missed dividend payments to the Treasury and the number of those payments as well.  The missed dividend signals the banks that are probably too far gone to survive.

Wondering if your local TARP-bailout bank is in good shape?  You can check for it in the SIGTARP report HERE.

To save you some time scrolling through the SIGTARP report, you can look on the following pages for:

Pp 98-102: 162 Banks that have missed one dividend or many dividends.

Pp 102-103: 41 Banks where the US Treasury has realized a loss through its TARP investment.

Pp 110-117: 99 Banks that have failed, gone bankrupt, or had their US Treasury investment forcibly restructured.

 

On troubled Community Banks that still owe TARP money

One measure of recovery from the Great Credit Crunch would be the strength and stability of banks in the United States.  And, unfortunately, a great number of small community banks, we learn from SIGTARP, are really still sucking wind.

While 90% of the original TARP money[6] from late 2008 has been repaid from all of the TBTF banks (except Regions Bank), small and medium size banks have been much slower to repay.

As of the latest Congressional report, approximately 400 small and medium size banks have yet to pay back TARP funds.  Even that group of 400 TARP banks overstates smaller banks’ ability to repay, since an additional 137 banks swapped TARP funds for a program custom-designed to let them off the TARP hook, through a financing called SBLF.

What are the implications for the future of small banks unable to repay TARP?

400 banks account for approximately 5% of banking institutions in the country, not a huge portion of the total.  In a strictly macroeconomic sense, it is systemically irrelevant whether these banks live or die in the years to come.  A case can even be made that fewer banks in the United States would be just fine.

From a taxpayer perspective the $20 Billion value in small bank preferred shares and warrants represents less than the US Treasury risked with individual banks such as Citigroup and Bank of America in the early days of the crisis.

On the other hand, comparing small bank failure to household financial failure shows the locally devastating effect if they implode financially.  That is to say, it matters to those banks and their communities if they fail.  Not only that, we can assume, not unreasonably, that failing banks will be concentrated in depressed regions of the country, exacerbating access to credit for small businesses and real estate developers in precisely those areas which can least sustain losses.[7]

The SIGTARP report provides evidence, if you read between the lines, that a great number of these smaller 400 TARP recipients are on life-support, and many will not make it out of the intensive care unit.

Congress passed the Small Business Lending Fund (SBLF)[8] nominally to provide more credit for small business, but in reality to allow medium and small banks to exit TARP and roll into a less restrictive government program.[9]  One hundred thirty-seven banks qualified for Treasury funding under SBLF by proving their likelihood of increasing their loan portfolio to small businesses – and exited TARP shortly thereafter.  Those who could exit TARP at that time, did – the rest could not.

Furthermore, executive compensation restrictions make it unlikely that any bank still owing TARP money has a profitable and sustainable banking franchise.  If they could have paid it back, they would have by now.

The 162 Banks Most Likely to Fail

As of the July 2012 report, one hundred sixty two, or almost half of the remaining 400 TARP banks, have missed dividends (currently with a 5% coupon rate) on the preferred shares owed to Treasury.  By law, the dividend rates jump to 9% on these bank preferred securities beginning in 2013.  Payments of 9% on their capital is an exorbitant rate for banks to pay when the costs of funds in the money markets for healthy banks remain below 2%.

In sum, the picture is grim for remaining small and medium TARP banks, but the financial system and ordinary taxpayers will not suffer extraordinary losses.  To badly hit communities, however, more pain awaits, probably in the second half of 2013 when 9% dividends deal the fatal blow to weak banks.

 

 

Also see:

In Praise of SIGTARP Part I, “Truth in Government”

In Praise of SIGTARP Part II, “We blew it on the repayment of TARP by the largest financial institutions”

SIGTARP Part III – “The Citigroup Bailout”

and SIGTARP V – The AIG Bailout


[2] There’s a good public policy reason for this.  Exposing a weak bank publically may create a self-fulfilling prophesy of weakness, as depositors and customers leave the zombie bank for its stronger competitors.

[3] Which is why it’s kind of an illicit thrill to see struggling banks publicly outed this way.  I know, I’m weird.

[4] One strongly implied reason at the beginning of TARP was the ‘safety in numbers’ idea.  That is, if many banks took TARP funds at the same time it would remove the stink of government intervention from the actual targets, the TBTF banks on the financial precipice.  Another reason is probably the sway of small and medium banks with their Congressional representatives.  One reason that makes less sense is the systemic value of small and medium banks.

[5] TARP funds were supposed to be only available to Qualifying Financial Institutions (QFIs.)  But the definition of a QFI included the mandate that they be “healthy, viable institutions.”  We know with hindsight that at least both Citigroup and Bank of America would have failed to qualify for this designation had “healthy, viable” been a truly disqualifying condition.  But we now also know hundreds of small banks failed that test as well.

[6] In this posting, by “TARP funds” I really mean to refer to the Capital Purchase Program (CPP) by which Treasury bought preferred shares and warrants in 707 banks, including the largest 17 TBTF banks.  Technically “TARP funds” could include a wide variety of other investment programs authorized under TARP, but I’d rather use the acronym TARP than CPP, since it is better known.

[7] See this interesting site with stats and maps of bank failures.

[8] In September 2010

[9] The initial dividend rate of 5% matches the TARP dividend rate of 5%, but crucially SBLF funding does not carry restrictions on executive compensation.  Much better, Smithers.

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In Praise of SIGTARP, Norse God of Financial Accountability

“…But in 2012, the people became restless.  They mistrusted the 1% who lived far away in beautiful, unattainable, icy Jotunheim.

And the people quarreled amongst themselves.  They could not agree with one another or keep the peace.  The people were the 99%, and they divided into warring ideological camps, visiting bloody internecine raids upon the other side.

One group, the Teaparty tribe, worshiped the demigod Free Market and raged against encroachments from their sworn enemy, Big Gov, who dwelt smugly in the elaborate Federalist castles of Washington DC.

The others, the Occupy tribe, supplicated before the Mother Goddess Collective Action, and they named their enemy Big Bank, who ruled cruelly from the executive suites of New York skyscrapers.

Periodically one tribe drew blood from the other side in a furious ideological battle.  But even amidst the carnage, both sides wished for a savior, a hero who could unite them.  The One.

In the beginning, little did the people notice online publications from Neil Barofsky, which showed the 99% their common enemy lived in both Washington DC and Wall Street.  Who was this Neil Barofsky?  At first he appeared to be a mild-mannered grunt, a common civil servant, toiling in the basement of the US Treasury from 2008 to 2010.  But on July 25, 2012, with the publication of Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, he became known to the world as SIGTARP[1], Norse God of Financial Accountability!

At last revealed in all his glory, SIGTARP arrived, flanked by Amazons!

The 99% needed a hero to unite them, to show them how both Washington and Wall Street betrayed them all.  SIGTARP unfurled his fearsome flag of financial accountability.  The two tribes put down their weapons against one another and turned toward the new banner.

They finally understood the truth.  Big Government and Big Bank conspired together to keep them down.  A new unity began to emerge, as the armies of the 99% integrated.

No longer needing his disguise as Neil Barofsky, SIGTARP ripped off his itchy wool suit to reveal rippled musculature and a mighty pen describing infernal, festering corruption.  Under the Bailout banner, SIGTARP and the newly united 99% began their determined march upon Jotunheim.”

 

Ok, I haven’t read Bailout yet, as it was just published today.  Based on today’s NY Times Review, the book suffers from some simplistic moralizing and, perhaps, Barofsky’s savior-complex.

But – and I mean this in earnest – I have had a serious man-crush on Neil Barofsky for a while now.  As SIGTARP, he managed to accurately review the TARP process, while maintaining critical distance from both Washington and Wall Street.[2]  I will highlight in the next few weeks some of the excellent reporting done by his office.  For all the unhappy things that may be said about the cynical nexus of Wall Street and Washington, SIGTARP has given me hope in the last year that our system can be resilient and accountable.  A hero may yet rise.

Thank you SIGTARP!

“No problem, kid,” answers a booming, disembodied voice, before soaring upward, headed toward Jotunheim.


[1] SIGTARP stands for Special Investigator General  for the Troubled Asset Relief Program, the Congressionally appointed watchdog over the $700B TARP program created in 2008 at the height of the Credit Crunch.

[2] Not an easy trick!  As the NY Times review excerpts from the book preface, Barofsky met in 2010 with Herb Allison, former head of TIAA and Fannie Mae:  “ ‘Have you thought at all about what you’ll be doing next?’ Mr. Allison asks Mr. Barofsky, soon adding, ‘Out there in the market, there are consequences for some of the things that you’re saying and the way that you’re saying them.’  ‘Allison was essentially threatening me with lifelong unemployment,’ Mr. Barofsky concludes, and alternatively suggesting a plum government appointment some day if Mr. Barofsky would simply ‘change your tone.’  When Mr. Barofsky tells his deputy of the exchange, the deputy says, ‘it was the gold or the lead,’ resorting to their joint experience prosecuting drug kingpins in New York: Cooperate and share the riches, or don’t and get plugged.”

 

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