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Forum Post: Too Big Banks Will Fail says Neil Barofsky TARP "Special Inspector General" 2008-2011

Posted 11 years ago on Aug. 3, 2012, 1:08 a.m. EST by gsw (3410) from Woodbridge Township, NJ
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Neil Barofsky, special inspector general of TARP from December 2008 to March 2011."

NEIL BAROFSKY: If we don't change our ways, if we don't do something about the size of these banks, we're going to end up in another financial crisis.

NEIL BAROFSKY: I don't think it; I know it's going to happen, if we don't stop this. Risk is going to pile up in ways that we don't even imagine, and it will blow up again.

Although TARP did meet one primary objective: prevent the entire financial system collapse, other objectives: helping Main Street institutions and individuals and businesses came short.

Money went to banks no strings attached...essentially piles of money "without instructions whatsoever and sort of this hope that somehow or other they use the money to achieve the policy goals of the administration. Of course, that never happened..."

The banks are now 20 percent to 25 percent bigger because of government policy that saw problems with too-big-to-fail banks and decided to make them even bigger.

NEIL BAROFSKY: This is exactly the problem. This is where the financial interests have captured the governmental institutions.

The biggest disillusionment was seeing how our elected officials and our appointed officials would put the interests of the giant financial institutions, the banks, banks that they had previously worked for, or banks they hoped to return to go work for once again, over the interests of struggling homeowners and over the interests of the broader economy.

It's a problem that our leaders -- and these were Democrats and these were Republicans -- all catered to the interests of financial institutions over that of the American people. That transcends politics.

Homeowners were given little help, just 800.000 of 4 million originally targeted.

On August 2, 2012 PBS "The News Hour" featured Neil Barofsky, special inspector general of TARP from December 2008 to March 2011. "

Making Sen$e of Bailouts: Why the U.S. Government Bought 'Troubled Assets'


Also on Frontline, August 1, 2012 http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/money-power-wall-street/neil-barofsky-on-the-broken-promises-of-the-bank-bailouts/

Your book is just as much about dysfunction in Washington as it is about TARP. What did you find are the implications of that dysfunction when it comes to effective oversight?

It’s pretty hopeless. Unless you recognize the flaws of our system and how fundamentally broken our system of regulation is, it’s going to remain hopeless. …

Fundamentally we have, on the one hand, the corrupting influence of the megabanks, which have to be broken up. They have such a corrupting influence because of the power, their size, their economic might and also because of the corruption of ideology because of the revolving door. So many of the Treasury officials come from the Wall Street banks they’re supposedly regulating. So that’s part of the fundamental problem.



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[-] 2 points by Nevada1 (5843) 11 years ago

Thank you for this forum post.

[-] 3 points by gsw (3410) from Woodbridge Township, NJ 11 years ago

There's a revolving door between bureaucrats in Washington and Wall Street banks, and politicians just want to keep their jobs. For regulators it's something like this: "You can play ball and good things can happen to you get a big pot of gold at the end of the Wall Street rainbow or you can do your job be aggressive and face personal ruin...We really need to rethink how we govern and how regulate," Barofsky said.

Watch the whole video below:

Read more: http://www.businessinsider.com/neil-barofsky-2012-8#ixzz22WK3vxi8


[-] 2 points by Nevada1 (5843) 11 years ago

And more great info and links.

[-] 1 points by gsw (3410) from Woodbridge Township, NJ 11 years ago

Enron-like bankers "earned" huge sums of money, essentially stealing and lying, got rich , ruined the world economy, made off like bandits, gave themselves bonuses, and were bailed out by the government and then gave themselves more bonuses.

The common person lost their pensions, their homes, their dreams, their jobs, their political system.

There was no capitalist economic penalty or correction from politicians.

And it can all happen again.

"Fool me once shame on you" ---George Bush

The chickens have come home to roost.

[-] 2 points by Nevada1 (5843) 11 years ago

Regarding many of the bankers, if they can steal, they will steal. As it all works so well, they will do it again.

Incorporation is a disaster. Corporations are a mechanism by which the worst people can get control. Now they run everything. So many critical aspects of government, now privatized.

No justice in sight.

[-] 2 points by gsw (3410) from Woodbridge Township, NJ 11 years ago

You are welcome.

The bank's rules need to be fixed.

Ex-Citi chief Weill urges Bank break-up


Instead of returning to Glass-Steagall, regulators could build in incentives for the industry to deconsolidate on its own and reduce risk. One idea could be to create incentives such as more attractive capital rules for smaller institutions, which could make them more profitable and encourage managements of large banks to break into smaller pieces, he said.

"The point is if you get them down to a reasonable size, where they are not too big to fail, you then have the ability to manage the situation if one of them gets somewhat out of line," Hagan said.


Some banks have been getting smaller. Citigroup, for example, has sold more than 60 businesses and $600 billion in assets since determining in 2009 that about 40 percent of its balance sheet was no longer necessary for its banking operation.

Many bankers say what is most likely to happen is that big banks will continue to shed some parts of their businesses and strengthen their balance sheets -- but that there is no 'big bang' series of break ups.

"We need a good discussion about how these institutions might be simplified and much better regulated," said Bill Isaac, former chairman of the Federal Deposit Insurance Corp, who is now global head of financial institutions at FTI Consulting and sits on the board of Fifth Third Bancorp. Isaac does not advocate a return to Glass-Steagall.

With clamor growing for a solution in the United States, some believe regulators may find a way to enforce even stricter rules.

"It's possible that the government would impose a Glass-Steagall type structure, especially if there's another blowup," said one Wall Street source.

But, he added, "I doubt any bank would voluntarily do it." (Additional reporting by Dan Wilchins; Writing by Paritosh Bansal; Editing by Martin Howell and Muralikumar Anantharaman)

"But consulting firm Bain & Co, which was hired by Citigroup to do a study, concluded that tax considerations made a breakup inefficient, the source said.

The report, which was kept hush-hush due to the sensitivity of the matter, was not widely circulated even internally at the bank. It couldn't be learned what exactly the tax implications would have been"

Bain & Company is Different from Bain Capital, apparently.