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Bailout, the book

August 5, 2012

You know that feeling, where you feel like a conspiracy theorist because, even though you don’t have cold hard evidence for it, you have a distinct feeling that someone is trying to thwart you even though they claim to be your friend, or thwart an idea they claim to believe in, or even worse, thwart a principle they claim to stand by?

That’s how I was feeling about Tim Geithner, and frankly the entire Obama administration, until I read “Bailout,” the recently published tell-all book by Neil Barofsky, who was put in charge of detecting and preventing fraud related to TARP.

I recently blogged about how I consider this book a call to Occupy, but I had only read the excerpt from Bloomberg at that point. Now that I’ve read the book, it’s most definitely a call to Occupy, as well as to any group or individual who still has principles and enough energy up to summon outrage.

Going back to the feeling of being a conspiracy theorist.

Nothing in this book was really new to me or really surprised me, except the fact that Barofsky was willing to write it down in black and white. Thank goodness there are still a few people who still have principles, even inside Washington.

Everything there was something I’d pieced together either working in finance, where I lost faith in the Obama administration right away when it introduced HAMP, which was clearly set up to fail homeowners, or by meeting people in the Alternative Banking group of #OWS, specifically Yves Smith, who explained the technical details of the more recent mortgage settlement, and how it is a backdoor bailout to the banks. Yet another one!

Where was the corresponding bailout for the people? Why this doublespeak, where we’d talk about moral hazard for people who have been screwed by the predatory loan industry, but the moral hazard for AIG executives getting multi-million dollar bonuses after an $85 billion bailout is just something we have to swallow, out of deference to the sanctity of contract?

And if we care so much about contracts, why do we allow companies to enter bankruptcy just to jettison pension promises but we don’t allow individuals (who are not too-big-to-fail) to renegotiate crippling student debt loads?

I’m confused no longer. It was never Geithner’s intention, or Obama’s intention, to help out the people. It has always been their intention solely to prop up a failed banking system. What they’ve been doing, rather than saying, is much more consistent with this theory anyway. Lots of roundabout efforts to explain why they’d set up a mortgage modification system to help homeowners was completely ineffective; it’s because it was actually set up to slow down foreclosures in order to “foam the runway” for banks to get back into the black. That makes much more sense!

It actually restores my faith in the Obama administration a bit. Before this I was sometimes torn between thinking they were bought by the banks or they were utterly incompetent. But now I know they aren’t entirely incompetent in the follow-through with their goals: they actually did succeed in slavishly working for the banks in the name of helping out homeowners.

Thank you, Neil Barofsky, for a great book. Thank you for maintaining your justified anger and for being courageous enough, and enough of a dick, to write it.

Categories: #OWS, finance
  1. August 5, 2012 at 12:33 pm

    What a spectre of perfidy that we must believe (can’t prove) the Obama “Chicago School” view is that the TBTF Banksters are a necessary evil to ensure the ongoing kapitalization of the genius and innovation of Amerikan kreativity for the sake of (a rather imperialist) growth. We are left with the faint solace that it surely would have been far worse under a President Mac, with a further entrenchment of Kapital as dominant in reducing and privatizing the commons and infrastructure vital to preserving and re-expanding the hollowed-out Middle Class.

    A President Mint RawMoney would certainly accelerate the perfidy, and we are left (at best) with the daunting duty of twisting the arm of Obama and dragging his twisted, elitist, Ivy-League minions back into the sanity of separating massive gambling (with bad math and tax money) from the ideal of prudent financial fiduciary responsibility. This can probably only be accomplished along with an irrepressible demand that corporate entities must have none of the civil rights of people, and that money is certainly not equivalent to free speech in a supposedly representative republic.


  2. August 5, 2012 at 8:02 pm

    Yes, where we went wrong, can be stated as “giving private for profit banks and financial institutions the right to produce our currency and to charge interest on it. Also giving them (banks and financial institutions) the right to keep their gains and not pay their losses since the money they create is guaranteed by the government (the people).
    “Don’t End The Fed, Amend The Fed”
    Google it, Read it, Improve it, use it for the betterment of all.
    Separate private banks from the government.


  3. SagittariusA
    August 7, 2012 at 1:48 am

    Exciting book with a stirring plot but it doesn’t produce any real insight about the motivations of the people it ruthlessly criticizes (yea, yea, they are all gangsters and thugs, can we move on to more productive discussions though?).

    Great to learn about one (apparently infallible) man’s struggles to provide a check on what might otherwise have been an even bigger mess than it was. One man’s. Nothing more than that, though, let’s be honest.


    • August 7, 2012 at 11:55 am

      What if one were to convince two, who would convince four, etc. ?
      Would this be a better world ?
      Excerpt from “Don’t End The Fed, Amend The Fed”
      Separate private for profit banks from government backed losses.
      Do your part to convince two people and start humanity on its way to prosperity.


      • SagittariusA
        August 7, 2012 at 3:06 pm

        Convince them of what? It’s well and good to want reform and a better world (though first we need to decide what exactly that means), but building a better world requires a lot of sweat and hard work and old-fashioned research.

        This book isn’t any of that. It recounts the experiences of one man, but it doesn’t pick the good fight of trying to understand what incentives, dynamics, and institutional factors produced the behavior that it exposes.

        I don’t blame it for that. The author wanted to tell us about his experiences, not to conduct a complex empirical study of human behavior at the public/private nexus.

        I merely want to point that this is a very, very small part of the story. No offense to Neil, he is a much smarter man than I’ll ever be, but he was a tiny part of this entire mess and he didn’t have a seat at the tables where many hard decisions were made (as he himself says).

        So his perspective, valuable and important as it is, is just not enough to draw any conclusions.


  1. August 21, 2012 at 7:38 am
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