NEIL BAROFSKY, FORMER SPECIAL INSPECTOR GENERAL FOR TARP, SHARES HIS VIEWS ON THE PROGRAM’S FAILURES, ON “CBS THIS MORNING”
BAROFSKY TELLS CO-HOST CHARLIE ROSE AND CBS NEWS CHIEF WHITE HOUSE CORRESPONDENT NORAH O’DONNELL, “WHERE WE ARE IN THE ECONOMY TODAY IS PARTLY THE RESPONSIBILITY OF SECRETARY GEITHNER AND THE BAD POLICY CHOICES HE HAS MADE”
Neil Barofsky, former special inspector general for TARP (Troubled Asset Relief Program) and author of Bailout, shared his views on why the program failed with co-host Charlie Rose and CBS News Chief White House Correspondent Norah O’Donnell, live today, July 23, 2012, on CBS THIS MORNING on the CBS Television Network (7:00 AM – 9:00 AM).
Below are excerpts from the interview:
ROSE: My impression was that TARP was intended to stop a gigantic financial collapse of the system, and if they didn't do that and put some confidence back, the whole system would go tottering over.
BAROFSKY: Absolutely, and it deserves credit for having done so. But, when you think about it, throwing $300 billion at banks along with trillions of dollars of other support just to preserve what is essentially a broken status quo that benefits really the financial executives, the institutions a little more, wouldn't be that impressive. That's why Congress insisted and the Treasury promised more. They promised that the banks would take this money and use it to deploy into the economy to help bring back economic growth, which hasn't happened because of the way it was mismanaged. They promised, and TARP doesn't get passed but for the promise to help struggling homeowners and deal with the foreclosure crisis. Democrats and Congressmen are not going to pass the bill without that promise. That promise was abandoned. The reason why is, again, the interests of the banks were always put first. Secretary Geithner himself, when we were confronting him about this in 2009, gave us a good indication why. He said that the housing program, this thing that was supposed to be a $50 billion program to help 4 million people stay in their homes, was about as much as folding the runway for the banks as anything else.
# # #
O'DONNELL: I know you're critical of how TARP was managed. But, you do acknowledge it helped to stabilize the economy. The auto companies are back. Detroit didn’t go bankrupt. In fact, now Chrysler is thriving. So what's your beef? There are many economists that say it saved 8 million jobs. Most of it has been recovered. The taxpayer money, was about $700 billion, 83% has been recovered.
BAROFSKY: Again, these are good things. I'm not taking away. I was one of the first people outside the bubble to credit TARP with having done that. But, you can't look at a program just that narrowly. This program was supposed to do a lot more for the American people. It wasn't an accident. This wasn't happenstance. These were a series of choices. The choices with not to deploy TARP funds to help Main Street and to help homeowners as they were supposed to do and how they promised to do. The housing program was supposed to spend $50 billion. Today it's around three. That means that this Treasury Department chose to spend more money to bail out American Express, a credit card company, than it did to deal with a foreclosure crisis that's holding our economy back still today.
# # #
ROSE: Specifically, what are you saying about Secretary Geithner, who was formerly head of the New York Fed? What is it that you believe he did wrong?
BAROFSKY: Among other things, he presided over and made the policy choices to put the banks before homeowners. He oversaw a policy that saw our largest banks, the too big to fail institutions, get bigger than ever and more powerful, more politically connected.
ROSE: That's Dodd-Frank, is it not? Rather than – that was passed by the Congress – rather than what the Treasury did?
BAROFSKY: First of all, he helped oversee making the bigger banks even bigger at the beginning of the crisis. Then as Dodd-Frank was going through and there were bipartisan efforts to potentially break up the banks, to try to break free their vice-like grip on our economy, again, so we can have economic recovery, and Tim Geithner and the Treasury administration led the crusade to fight that bill, to keep it from happening. Where we are in the economy today is partly the responsibility of Secretary Geithner and the bad policy choices he has made.
ROSE: And the foreclosure crisis has not been solved, and the housing industry has not come back.
BAROFSKY: Potentially 10 million more people may face foreclosure in this country. These were avoidable problems, and we're paying for it every single day in this stagnant recovery.
Click here to watch the video.
<embed src="http://cnettv.cnet.com/av/video/cbsnews/atlantis2/cbsnews_player_embed.swf" scale="noscale" salign="lt" type="application/x-shockwave-flash" background="#333333" width="425" height="279" allowFullScreen="true" allowScriptAccess="always" FlashVars="si=254&&contentValue=50128346&shareUrl=http://www.cbsnews.com/video/watch/?id=7415862n&tag=mg;cbsthismorning" />
Chris Licht is Vice President of Programming, CBS News, and Executive Producer of CBS THIS MORNING.
* * *
Press Contact: Whitney Kuhn 212-975-2856 KuhnW@cbsnews.com