Report on Bailouts Says Treasury Misled Public
WASHINGTON — The inspector general who oversees the government’s bailout of the banking system is criticizing the Treasury Department for some misleading public statements last fall and raising the possibility that it had unfairly disbursed money to the biggest banks.
Video TARP Official on Audit (CNBC)
A Treasury official made incorrect statements about the health of the nation’s biggest banks even as the government was doling out billions of dollars in aid, according to a report on the Troubled Asset Relief Program to be released on Monday by the special inspector general, Neil M. Barofsky.
The report also provides new insight into the way the Treasury allocated billions of dollars to nine of Wall Street’s largest players. The report says that Bank of America appeared to qualify for more aid earlier, under the government plan. That assertion adds another element of intrigue to continuing investigations of the bank’s merger with Merrill Lynch and the role that regulators played in the deal, even as Merrill’s condition deteriorated.
The bailout formula called for banks to get an amount equal to as much as 3 percent of their risk-weighted assets, with aid capped at $25 billion for each ins ution, according to the report. By size, Citigroup, JPMorgan Chase and Bank of America could have qualified for more, and the first two received $25 billion.
But Bank of America was given only $15 billion in October, since Merrill Lynch was earmarked for $10 billion. The two companies agreed to a merger, though their deal had not yet been approved by regulators or shareholders.
Bank of America ultimately received Merrill’s $10 billion in January — as well as $20 billion in additional bailout funds — but if the bank had not been involved in the Merrill deal, it would probably have received $25 billion at the outset, as did Citigroup and JPMorgan.
Another company in the process of a merger was not treated the same. Wells Fargo was acquiring Wachovia, and it received both companies’ money at the start, according to the inspector general.
Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy.
Former Treasury Secretary Henry M. Paulson Jr., for instance, said on Oct. 14 that the banks were “healthy,” and that they accepted the money for “the good of the U.S. economy.” The banks, he said, would be better able to increase their lending to consumers and businesses.
In truth, regulators were concerned about the health of several banks that received that first bailout, the inspector general writes.
The inspector general said government officials need to be more careful when describing their actions and rationale. In a letter included with the report, the Federal Reserve concurred with Mr. Barofsky’s concern about the statements made last year, but the Treasury Department said that any review of announcements last year “must be considered in light of the unprecedented cir stances in which they were made.”
It's the govt, of course they were lying about the bailout.
Anybody with ANY sense realized the game stunk when Paulson sent his over-the-weekend 3-pager, demanding $700B, within 7 days, with Paulson to be beyond the reach of legislative or judicial oversight, ... or else (the banksters would destroy the country (but save themselves)).
The banks held a gun to their own heads; the USG disarmed them, then emptied the clip in the US taxpayer.
One of those is too dumb to know the damn difference. I'd say their ability to pick a target is rather good.
BTW, my outrage about our government, bailouts, war, torture and raping of civil liberties has reached its limit.
I have become comfortably numb.
I laughed, but this makes me sad.
i would be there with you on the ledge but i have never vested my faith in the government. now if my community and municipality was as bad as the federal government is as a whole i'd be a notch up on the totem pole of cynicism.
They'll never tell us its gonna hit the fan until 2 weeks before it happens. Then its an emergency and we must do what they say.
Very good point, rjv.
And then they never give the emergency powers back.
With the clarity of hindsight, what do you think should have been done?
Insolvent megabanks should've gone into receivership, been stripped down and reorganized; insolvent firms not backed by government guarantees should've been allowed to fail.
However, the economic pain of such an adjustment would have been politically -- and maybe socially -- intolerable. There would have been a deflationary crash and a devastating crisis of legitimacy for capitalism a la the Great Depression.
Unless the government breaks up TBTFs, the whole bailout charade is likely to be repeated, and according to Nouriel Roubini, QE is already creating new bubbles.
We can't cry over spilt milk. It's time to start putting our economic house in order. The first order of business should be to dismantle TBTFs and to rescind guarantees for firms that fail.
TBTFs shouldn't be allowed to soak the US taxpayer again.
We've already hocked our future once for them. It should be the last time.
There will never be any political will to allow the system to crash in that manner.
Oh I agree. But by putting off the day of reckoning we only set ourselves up for further instabilities down the road.
The next time could be much worse.
I agree, but how? Wouldn't the dismantling of the TBTFs you are calling for be the very epitome of government intervention that was displayed by the bailouts themselves?
Oh yes.
The government should protect us from very large corporations who hold the whole economy hostage and demand ransom from the US taxpayer.
"dismantling of the TBTFs"
.... should have been done like the RTC, Resolution Trust Company, that wrapped up the S&L disaster in the Ronnie Reagan 80s. BoA, Citi, WF, AIG, all sliced up as bankrupt/insolvent TBTB (which they still are), and the parts sold off, like at a junkyard.
Last edited by boutons_deux; 10-06-2009 at 04:57 PM.
I live in Michigan.
A state that just shut itself down for about 2 hours the other night because they cant convince the teachers Union to accept any concessions whatsoever.
Teachers in Michigan make $14k more per year than the national average, not including pensions and benefits.
Nevermind....Here is the article
The only solution in our state is to increase taxes, namely the sales tax. Problem is, it wont be enough. Michigan has a very unique problem.
We're losing jobs at an alarming pace while at the same time losing population at an alarming rate. We have an entire city (Detroit) that is subsidized by the state because Detroit has something like a 30% unemployment rate and an abnormal percentage of residents are on "the draw" (SS, medicaid, welfare, etc).
So, as far as our Federal government versus my State and local governments, they are both equally ed...if not my state being moreso.
Another point, even if Michigan convinced the Teacher's Union to take concessions, this is only a one-year balance sheet.
What, pray tell, does this imply? It means my State government is tapping into Federal Stimulus money in advance from next year to balance the budget.
Which means, after Fed funds run out (end '10), our state is billions of dollars unbalanced. These legislators cant even come to an agreed solution with Federal money added in...what do you think will happen when they have to balance the budget with no FedStim dollars?
Michigan is as dead as dead gets.
Delta City is the only solution.
But really, how ing hard is it to get these assholes to pay back what was doled out? I don't care if it's on a 10+ year plan. Pay back the ing money.
How much money does Michigan pay for state business advertisement? I swear I see a commercial with Lloyd from Dumb and Dumber everytime I turn on the TV.
How's the non glove part of the state doing? They thinking of becoming North Michigan?
The UP (Upper Penninsula) is basically Wisconsin and completely unpopulated by any standard.
Put it this way, they are loyal and diehard Packer fans, cheese helmets and all.
They havent been a part of Michigan loooooong before I was born.
To answer your question directly, theyre doing fine in the sense that their cost of living is ridiculously low in comparison to us "trolls" (we in the LP are referred to as trolls because we live "under the (Mackinac) bridge").
My wife's best friend's brother is a teacher in the UP. He says nothing has changed one way or the other, its still desolate and ridiculously cheap with wages to match the very rural lifestyle.
Meanwhile, here in Detroit:
http://detnews.com/article/20091007/...g-federal-helpChaos at Cobo: Detroiters demanding federal help
Christine MacDonald, Santiago Esparza and George Hunter / The Detroit News
Detroit -- Thousands hoping to get applications for federal help on rent and utility bills turned Cobo Center into a chaotic scene today.
They came by foot, wheelchair, bicycle and car. About six left by ambulance after tensions rose and people were trampled, according to a paramedic on the scene. One sad sack got his car booted.
Detroiters were trying to pick up 5,000 federal assistance applications from the city at Cobo because Detroit received nearly $15.2 million in federal dollars under the Homeless Prevention and Rapid Re-Housing Program, which is for temporary financial assistance and housing services to individuals and families who are homeless, or who would be homeless without this help.
Advertisement
People in wheelchairs and others using canes were being leaned on by people too weak to stand. Emergency medical technicians on the scene said they treated applicants who were injured during the rush to get inside the venue.
That's what happens when a town full of broke people gets a whiff of free money, said Walter Williams, 51, who came before the sun to get an application and a shot at some federal assistance.
"This morning, I seen the curtain pulled back on the misery," he said. "People fighting over a line. People threatening to shoot each other. Is this what we've come to?"
Outside Cobo on Wednesday, some people reportedly were going through the crowd, snatching the necessary applications from those who'd already obtained them. There also was a constant din of screams from people insisting they be let inside.
LaTanya Williams, a 32-year-old Detroiter, quickly filled out her form because "people are stealing them."
"I am hoping to get any help that they will give me," she said. "Everybody needs help."
By early morning, the applications had run dry. But some hustlers got the bright idea to photocopy the original and sell the copies for $20 a pop. They were doing a brisk business. The desperate are easy prey. The white original applications stated clearly on the bottom: "Do not duplicate -- Must Submit Original Application."
By late morning, however, volunteers from the City of Detroit Planning and Development Department were handing out yellow photocopies themselves.
"I'm not even sure the government will accept those applications," said Pam Johnson, a volunteer. "But it's almost like they had to pacify people. There was almost a riot. I mean, they had to call out the gang squad. I saw an elderly woman almost get trampled to death."
John Paul, a 25-year-old Detroiter, said the crowd and chaos illustrates the need people have for help.
"We need it," he said of the money. "Whatever they have for me is great."
Detroit Police 2nd Deputy Chief John Roach said 150 officers on the scene got a handle on the situation. "There was some pushing and shoving, and some people have fainted," Roach said. "Given the fact that we have 15,000 people down there, I'm surprised things have been as orderly as they are."
It was difficult to estimate the crowd because lines snaked all through the convention center and outside along the building and down the parking ramp along Cobo Arena to the river. One police officer estimated the crowd at 50,000.
More than 25,000 applications were snapped up in less than three hours Tuesday at Neighborhood City Halls. That day, Karen Dumas, a spokeswoman for Mayor Dave Bing, said some people mistakenly believed they would receive cash on the spot.
"That is totally untrue," she said. "There is a process."
Response had been so great that Detroit police and fire officials considered shutting down the process because of the volume of people.
Kelley Turcotte, a Detroit dishwasher, was near the end of the line around 10:30 a.m. today. The 27-year-old just had a son and said he is only squeaking by on his bills.
"I hope the government sees this and realizes the city needs a lot more help than they are giving," Turcotte said.
Luis Irizarry, 35, drove from Flint for the chance he could get assistance. He later found out only Detroit residents are eligible. He said it was a shock to see this many people in need.
"This is ridiculous," Irizarry said about the thousands who showed up.
Tony Johnson came at 5 a.m. Johnson has not found a job in three years.
"If I could win the mega lottery, I'd be tighty-iddy. I wouldn't be here," Johnson said. "But there's no peace 'cause there ain't no jobs. Everybody's looking for the freebie, the hand-out. They don't count me as unemployed 'cause I ain't drawing a check. It's like I don't even exist. But I do. Look around. There's thousands ... millions of us."
Dan McNamara, president of the Detroit Firefighters Association Local 344, was looking down from his office window across from Cobo.
"This absolutely is representative of the struggling middle class in America," he said. "We've been betrayed by the government, Realtors and those who've got. The promise has been broken."
Detroit News Staff Writers Christine MacDonald, Santiago Esparza, Charlie LeDuff and George Hunter contributed to this report.
This is Detroit in a nuts , it cant be explained any better than that.
Theyre demanding Federal money and showing up in the tens of thousands to get it while its hot.
An entire city of people looking to the government for free money.
A city of a little less than 1 million people.
<-- speechless
It's kinda weird to me. I can understand that some people need help, and some people have probably gone to whatever lengths they could and this is the last resort to feed their family.
I, personally, would feel some small amount of shame and humility to ask for money though. I guess that's just how I am though; I've only asked my parents to help pay for something once since I've left the house, and promptly paid them back.
"would feel some small amount of shame and humility to ask for money though"
do you think this people feel pride and not shame?
There are currently 1 users browsing this thread. (0 members and 1 guests)
Posting Permissions
Reply With Quote
