Former TARP Official: Both Parties are Captive to the Big Banks

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Neil Barofsky, Special Inspector General for the TARP, listens during a hearing of the Senate Finance Committee on Capitol Hill July 21, 2010 in Washington.

While the current presidential race has predictably devolved into a series food fights over tax returns and awkward speech wordings, the nation’s economy limps weakly along. In addition, the causes of the 2008 financial crisis still remain a dormant threat to the global economy — a point that neither candidate seems interested in addressing. Enter Neil Barofsky, the former Special Investigator General for TARP, the $700 billion bailout fund launched in 2008 in order to stabilize the nation’s financial system and broader economy. Barofsky is out today with a new book Bailout, which he hopes will refocus the national debate towards how little has changed on Wall Street since the shenanigans of too-big-to-fail firms nearly brought down the global economy.

Bailout is an engaging account of the Washington turf wars and power plays that occurred as the Bush and Obama Administrations tried to revive the nation’s economy in the wake of the financial panic of 2008. Barofsky, an Obama-campaign-contributing Democrat, was plucked from a position in the U.S. Attorney’s office in New York City to oversee the government’s $700 billion TARP fund. But when Barofsky got to Washington, he found the Treasury Departments of both the Bush and Obama administration to be populated with those who either share Wall Street’s view that the broader economy is wholly dependent on the thriving of large, multinational banks, or regulators too concerned with their own career prospects to challenge that view. And at every turn, as Barofsky tried to impose more transparency and accountability on banks receiving TARP funds, he found himself met with resistance — most doggedly from Obama Administration Treasury head Timothy Geithner.

(MORE: The Neverending Bailout: The U.S. Is Still Owed $133 Billion from Crisis Fund)

This regulatory capture is the main theme of the book. In a phone interview with TIME, Barofsky said exposing this subtle form of corruption was his main motivation for writing the book. And no official gets it worse than Geithner, who, Barofsky argues, “has shown a remarkable deference to the interests of Wall Street, by protecting them at every juncture through the implementation of TARP and the regulatory reform process.” Throughout the narrative, Geithner and other Treasury officials bristle at and obstruct every attempt to turn up the heat on the banks, whether through auditing their use of TARP funds to ensure that they went to increased lending, or to forcibly shrink the banks through bipartisan legislation like the ill-fated SAFE Banking Act, which would have put hard caps on the size of too-big-to-fail banks.

And though the book itself doesn’t directly address President Obama’s role in this resistance, Barofsky ultimately holds him accountable. He supported the President in 2008, and says that he when he first started clashing with Geithner’s Treasury department, he engaged in “mental gymnastics” to absolve Obama of responsibility, thinking that the President wasn’t aware of the department’s obsequiousness towards big Wall Street banks. But over time, he came to realize that the White House itself was ultimately responsible for the misdeeds of the Treasury Department. Said Barofsky:

“You get to a point where as an executive you are responsible for the actions taken by your subordinates . . . and I don’t think these were just mistakes. I think this was the President’s position on the policy choices he wanted to make. And those policy choices have been unsuccessful at best, and disastrous at worst.”

(MORE: Break Up The Banks! Dallas Fed President Calls for The End of “Too Big To Fail” )

The conclusion of the book is that the only way to mitigate the influence of Wall Street on Washington and its danger it poses to the broader economy is to break up the banks. Barofsky’s view — which is shared by an increasing number of academics and regulators — is that no amount of regulation will save us when banks are too big to fail and too powerful to contain politically. As he notes in his book, the nation’s largest banks are still receiving a distinct funding advantage to their smaller peers. This means financial markets still believe that the government will come to their aid if any of them were to fail. And it’s this incentive which enables these firms to take outsize risks, like JPMorgan’s recent multibillion dollar loss in the derivatives market, or engage in fraudulent behavior like the recent LIBOR scandal. Barofsky said that our financial system, even post Dodd-Frank, is one:

“that doesn’t have the normal disincentives for fraud and manipulation by banks that are too big to fail and too big to jail because if we were actually to indict one of these institutions it would bring down our entire financial system.”

Not only would breaking up the banks make our financial system safer, he said, but it would severely mitigate the regulatory capture that is epidemic at Treasury and the nation’s financial regulators. Wall Street bank’s power is in part derived from their size and systemic importance. Barofsky’s book is well worth the read if you hope to understand how Washington can so easily come under the thumb of powerful interests, but his takeaway is simple: regulatory capture isn’t completely preventable, but you can seriously mitigate it if you reduce the power of the those doing the capturing.

MORE: USA 10-K: Why America Needs an Annual Report

113 comments
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TheDisclosure
TheDisclosure

Good new here. Jack Lew coming in for Treasury. GOP doesn't like him-you know he's good. Let's get cracking on these banks.

gekkobear
gekkobear

4) Really?

When I buy something it is added to the tally for my bill (closing date on the 20th) which is then due on the 15th of the following month.

Even if I buy something on the 20th, I have 3 weeks for the return to process without costing me a dime.

Now, if you're carrying a balance on you credit card, #1 is certainly your best option.  But #4?  Why bother.  I'll return it in 2 days and it'll be off my card before the bill is due.

Cost to me?  Nothing.

psusense
psusense

EXACTLY what I was thinking too. Stupid ideas given by the author. Also, MANY credit cards give you additional protection on what you buy.. so it makes sense to use a card to benefit yourself.

Troy Fuhriman
Troy Fuhriman

I thought they'd shoot for the more obvious things, such as:  (1) when you are buying the allegiance of war lords after your invasion of their nation-state; (2) when you are buying the allegiance of other governments; (3) when you want to bribe a public official; (4) when you are buying illicit drugs or (5) when paying for your the shopping habits of your mistress.

padgettshcom
padgettshcom

I always try to pay cash at mom and pop places, especially for things like a $2 coffee. So much so that I feel guilty when making such purchases with a credit card! But sometimes you can't help it and I know they appreciate the business. Right?

Mark Watson
Mark Watson

Aside from the fact that our "cash" is in fact a credit card due to the FED, it is much better to pay with cash in all transactions so that you are not traced.

Take a look at your most recent bank debit card statement, your credit card statement, your cell phone bill... see your name and address?  See every place you've been in the past 30 days?  See everyone who's called you or you called?  How about your GPS log?  Your Gmail/Yahoo account?  The number 1 known-associates file on the internet: facebook.

Now do the same thing for the previous 90 days.

The FEDS and the POLICE have access because all these companies roll over and piss in the air when asked for YOUR information.  No company ever says "but but my clients and customers have rights!"

Your pattern is your predictability.  If they can determine where you will be at any time, they can pick the best time to pick you up, for example, 2 days after the rent check clears when your account balance is near zero so you can't afford a lawyer. Public defenders get paid by the same means as the prosecuting attorneys, as does the judge!  It doesn't take much to get pulled over for speeding, then tested for the DUI right after the football party and locked up over the weekend.   Be careful, if you defend yourself against these civil rights violations, you will be tazed, your heart will stop and you could die.  It's lethel force to taze a cop or a police dog- but if they do it to you- they are "just following orders" so even if you go limp, they will scream "stop resisting! stop resisting!" loud enough for their dash cam to hear.

The $1 Federal Reserve Note 2012 is worth $0.00012 the USD 1913.  If you rob a bank you go to jail but you have not stolen anything.  If you hand over FRNs for a coffee or a pizza, the proprietor is not enriched, and you have just stolen a coffee or a pizza.... Thou shalt not steal, and yet christians are thieves too- what's worse- these christians vote for the people who put these thugs in power.   Before you misread Romans 13, go back and read 1 Sam 8.

The drones are now tasked over American soil, just like Iraq, Afghanistan.  We are the new theatre!  The military downloads their kill lists from DC into their Langly cubicle. They pull out their Joystick and play "kill the civilian" all day- possibly down your street... until 5:15p, when they go home for the day...   It's the 2nd and 3rd shift you really have to worry about!  They never see the blood, so no PTSD for them.

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paza ganaden
paza ganaden

Love my job, since I've been bringing in $82h… I sit at home, music playing while I work in front of my new iMac that I got now that I'm making it online…

R e d 9 7 . c o m

paza ganaden
paza ganaden

 My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do,Red97.c Om

paza ganaden
paza ganaden

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do, Blue31.c o m

paza ganaden
paza ganaden

I'm making $86 an hour working from home. I was shocked when my 

neighbour told me she was averaging $95 but I see how it works now. I 

feel so much freedom now that I'm my own boss. This is what I do, 

Red97.c oM

Ayesha Khan
Ayesha Khan

Money, i mean real money plays a very crucial psychological role, it has a significant bondage with us, it provides sense of security, but when we change the form of the real money then obviously we are tend to deceive our selves. It is always better to use the hard cash as much as possible, as when specifically we part with the real money it leaves a heavy  impact, in the same manner when we receive the cash the feeling is altogether is different.

Plastic money has its own advantages, but the end result is not as favorable as with the real money. Somebody said something wise, that never go shopping with an empty stomach, because then we are tend to buy more than we require. Since money plays a very important role in our lives therefore, we need to texture it, and we cannot possibly texture simulated money, that is plastic money, hence' at most occasions we either misuse, or abuse it------A fool and his money are soon parted.

Cyndy Hamilton
Cyndy Hamilton

Craft fairs are not the same thing as a flea market. Crafters and artists work hard to make the products that they sell and have set their prices accordingly. Pricing includes the materials, the knowledge to make a certain something, and the creator's time. If you think you can make something for less go ahead and use your talents and time at your own costs. Haggling at a craft show is disrespectful to the vendor. If you feel they are overpriced tell them politely or just don't buy.

davidhoffman
davidhoffman

At the craft and artist fairs I have been to the crafters and artists will negotiate on price. But not very much.  They did it in the days before mass production factories and will do it today.  The key is volume purchasing. When I go to fairs and find a crafter who has many items I wish to buy, I may make them an offer for the entire purchase at a discount.  The discount in price I suggest is a single digit percentage. But usually I do not even have to ask, they just do it on their own. Better still, I have been offered, without asking, and at a large discount, some additional  items because of the size of my purchase.  One key is being respectful and appreciative of the quality of work and materials that go into the craft.  For example, crafters dealing with wood usually have much better workmanship than typical store bought items.  The type of wood joints, glues, nails, brads, screws, and other hardware they use is going to make the item last much longer and work better. The same for some works done in metal or cloth.  Since I understand this engineering difference, I may not ask for a discount, because the longevity of the item will be my savings over having to buy multiple low grade items as they fail quickly.  You must understand the long term value of all the available similar items out in the rest of the world when purchasing from a crafter.  The initial asking price might be an excellent value.

jemileesmom
jemileesmom

 THANK YOU! Another person who gets it! Any crafter you encounter in your travels is lucky to meet you! I wish all customers were like you. :o)

BeadlesAz
BeadlesAz

oops - my reply needed proofing. Meant "well-written REPLY." ;-))

BeadlesAz
BeadlesAz

Cyndy - thank you for a well-written supply. I make hand-crafted jewelry, mostly in metals and natural stones. Lots of tools amp; equipment amp; materiel amp; labor. I gave up on craft shows - where people flocked to the booths carrying the made-in-China "3 bracelets for $8". If the buyer thinks that those bracelets are worth buying - they don't need to stop at my booth.

DonnyB2
DonnyB2

6. Purchases of illegal goods amp; services.

Dagger12
Dagger12

I disagree completely with #1.  When I spend cash on everyday purchases I always end up wondering where it went.  If I pay using my debit card or a credit card I can look it up online down to the cent.

Geoffrey Hamilton
Geoffrey Hamilton

Ummm, why wasn't buying porn orquestionable books on that list... don't want the feds to red flag you.

FreezerBoys
FreezerBoys

The tradeoff of rights you'll forfeit by using cash instead of a card far outweigh the few potential benefits received by paying cash for something you think you may have to return.

jhorsager
jhorsager

None of my top three made their top five.  But my top 3 can be summarized with one basic overriding principle:  anytime you want to remain anonymous.

Karen Campbell
Karen Campbell

If you pay with cash, there's no way for your spouse to know what you spent where.

Verminh8tor
Verminh8tor

"There’s also the unfortunate possibility that leaving cash tips helps waitstaff avoid paying taxes on the money by not declaring it, but the IRS has been cracking down on this practice in recent years, so it’s less of a concern than it used to be."

OMG how awful. You mean they might not contribute their fair share to spreading murder abroad and tyranny at home?

shepdogsd
shepdogsd

Tip#4 is WRONG.   If you lose your receipt when you pay cash, often times you are out of luck.  But many retailers can look up purchases by credit card if there is no receipt. 

You also have a record of it on your statement you can bring in later for smaller retailers.   I mean really...who can't wait a couple of days for it to clear?  Better than nothing at all.

Leo Zhu
Leo Zhu

Wow... the most obvious one and most beneficial one I've seen isn't even slightly mentioned. It has to do with Resturants but its not the tipping. Its the bill itself. There are plenty of resturants that will give the option to ignore the tax associated with dining in if you pay in cash. In Illinois thats usually a 9.5% tax, and it gives more incentive to leave a decent size tip for your waiter/waitress.

davidhoffman
davidhoffman

Encouraging tax evasion by restaurant owners.  Interesting.  The IRS and state taxing authorities have brought many restaurant owners, managers, and accountants into court on having engaged in such tax evasion schemes. At some point a forensic accounting analysis shows that too much food and beverage that are delivered to the restaurant, never gets consumed by paying customers.  At least according to the sales and income tax records when compared to delivered goods.

tibit
tibit

I don't leave cash tips because I don't want the tip to walk away with the next customer.

1CPBMichigan62
1CPBMichigan62

Hand it to the Server. That's what I do. To me it's worth the smile I get because I am confident I am a very generous tipper.

Thom Burke
Thom Burke

Hookers and drug dealers also generally operate on a strictly cash-only policy.

Just sayin'.

bellaluna30
bellaluna30

When I get excellent service at a restaurant, I make sure the person who provided said service gets the tip.  I generally also let the supervisor/front desk/garcon know, so there is no question about by whom we were served and the reason for the tip.  (I used to be a server, way back in the day, and I tried to ensure that my customers AND my bussers [we were required to tip our own bussers at this particular place] were treated well.  I was able to devote more time and effort providing good service to the customers, since I didn't have to worry about bussing my own station.)

As for open-air markets, farmers' markets, and crafts, I don't believe haggling is offensive.  As far as local markets, we try to frequent our local grocer (and other relatively local businesses), not only because it's local, but because the customer service is LOADS better than the local "chain grocer" (not had a bag break on me once, and they bag how I want the items bagged); they carry locally produced meats, dairy, and grain products; they will "special order" almost anything we request; their prices are comparable (within reason) to the "chain grocers;" and we don't have to drive 20 miles one way on country roads to get there.

jemileesmom
jemileesmom

Do you haggle with your local grocer? His/her livelihood depends on the sale of the goods in his/her store, just as the farmer's and crafter's livelihood depends on the sale of his/her goods. The overhead costs may be different, but just because the 'store' they've set up temporarily at a craft show or farmer's market doesn't have walls, doesn't make their goods less valuable than those of your local grocer.

Yard sales (I know, you didn't mention it. It was in #3 though, so I'm addressing it)- haggle all you want. Most of those people just want the stuff GONE!!!! At the end of the day, those with fresh product at a farmer's market may feel the same way. Most crafter's though, sell items that don't spoil. If it doesn't sell today at the marked price, then there's one less item I have to make for next week's show.

psusense
psusense

You are lucky if people walk and want to discuss the price. most times I walk away from ovevalued items

bellaluna30
bellaluna30

Actually, I don't have to haggle with my local grocer - they have offered to order things I purchase regularly "by the case" and pass the savings on to me. (Benefit of a local grocer: they remember what I regularly purchase, and how often.) :)

As far as haggling, I'm not out to screw anyone.  I'm willing to pay for quality, and will pay whatever amount is fair to both parties.  If the craftsperson is willing to lower their price, fine.  But I don't take advantage of, nor do I take for granted someone's hard work, and quality is ALWAYS worth the money.

An aside: I've noticed you seem particularly contrary in your replies to others, so I wish you a wonderful night/day and will no longer engage you.

jemileesmom
jemileesmom

Obviously, you didn't read all my posts. I agreed 100% with a post earlier that was against haggling at craft shows. In fact, the original poster and I had quite the nice exchange.

Posts I agree with, I hit the like button. Posts I have an opposing opinion to, I comment on.

Of course your local grocer will offer you a case price. It ensures that you are taking all the product they've ordered, and they aren't 'stuck' with something that may not sell. This is particularly true if you order something they don't stock regularly. That's not haggling, that's smart business on their part.

 To walk up to someone selling the items that they've worked hard to make, and ask if they will sell if for less is insulting. Anyone who comes up to me and asks that while I'm at a show receives a 'No', and a smile. I work hard on the items I make, and set a price that is fair. If you insult me by asking me to lower it, you are lucky you get a smile.

obamakilledusa
obamakilledusa

This article is stupid. It does nothing for the consumer. This article shoud be entitled, "avoid transaction fees for the sake of the retailer."

adamrussell
adamrussell

I find it impossible to keep cash in my wallet.  It just seems to evaporate!

kevpen
kevpen

And ALWAYS use cash when buying your porn!!

Jason McCann
Jason McCann

Any restaurant manager who "pools tips" has no business running a restaurant as they clearly don't understand the whole point of the tip in the first place.

davidhoffman
davidhoffman

If I understand the wage laws correctly, the only persons who should be receiving tips are the waitperson and the bartender.  The rest of the employees are supposed to be paid at least standard minimum wages. They are not considered tipped positions as they do not deal directly with the customer in the normal course of duties. The subject of busboys is a gray area.  If I am in a restaurant that uses busboys and I interact with them, I give them a separate tip. I do not reduce the servers tip by that amount.

Edwin Galdamez
Edwin Galdamez

there is already confrontation.  i'm leaving zero, nada, be glad you have a job.

adamrussell
adamrussell

Its in the waitresses interest to share the tips.  If any part of the service is bad then I am unlikely to tip as much.   Why would I tip big when I have to send the steak back to be redone?  Why would I tip big if the busboy grabs my plate away while my wife is still eating?  It all matters.

KimmieJ
KimmieJ

Why would punish the waitress if you have to send the steak back to be recooked? She didn't cook it. Please, please don't punish the server for something they have no control over. And, as a long time waitress, it is defintely NOT in our best interest to share tips unless one is a terrible server.

jemileesmom
jemileesmom

 Yes, it all matters as part of your entire dining experience, I won't disagree there.

However, if you are at a place that doesn't pool tips, you are punishing your server for the busboy being an idiot. It would be no skin off the busboy's nose to do that over and over again, knowing it would affect the server's tip, if he/she had a beef with the server for one reason or another. The server has no control over that busboy does his job, that's up to the manager.

jemileesmom
jemileesmom

Obviously, you've never waited tables. There is FAR more to it than carrying a plate 10 feet. They have 4-8 tables to a section, which means 4-8 groups of people to care for at once.

A good server will be able to take care of those people with no mistakes. They will check your order before bringing it out, and correct any mistakes the kitchen may have made, before you see your plate.

A GREAT server will be able to do all that, PLUS tell you who is drinking what, and who ordered what without looking at their order pad, they will have your drink replaced without you asking (if it's a beverage with free refills), or offer you another cocktail before you start looking around wondering if you will get more. They will have done their job well enough, long enough to anticiapte what you may need, before you even know you need it.

To reduce a tip because a rogue busperson does something he/she shouldn't, is wrong.

adamrussell
adamrussell

Im not punishing anyone.  Im just not paying for something I didnt receive.  A tip isnt charity.  Its payment for services.  And the service paid for isnt the act of carrying a plate 10 feet.   Thats not worthy of 15-20% or more.  If that was what the tip was for then a tip would be charity.  It would be about "padding the poor waitresses income".  No.  A tip is payment for services.  If all she can do is carry a plate - and NO more- then she doesnt deserve all that much.  Yea Ill still tip, but not so much.  

Jessica
Jessica

 "Why would I tip big when I have to send the steak back to be redone"

Maybe because the waitstaff didn't cook your meal. Your tipping the wait staff for wait service not the cooking service.

jemileesmom
jemileesmom

 It is up to the waitstaff to ensure they are bringing the right food to the table though. You can tell by looking at it if it's well done, when it should be medium-rare. You should fix it THEN, not after you take it to the table, HOPING the customer won't notice.

I found that my customers were more understanding about an item being cooked wrong, if I went out and told them it would be a few extra minutes because the cook was fixing a mistake PRIOR to it making it to the table, than if they had to tell me it was wrong. It showed them that I cared enough to ensure that their special requests were honored (sometimes it's more than just how a steak is cooked), and refused to bring out anything that wasn't right.

Lisa Eberhart
Lisa Eberhart

The waitstaff doesn't cook the meal, but maybe they entered the temp wrong. 

If you're a GOOD server, then you can take a situation where the kitchen screws up and make it a plus with great customer service by being proactive. If you're on top of your tables and know how long the ticket times are, then you'll know if a steak is getting over cooked. Also, you have to keep on top of the expo - and make sure they pull the right steak, check your order before it's run AND run it yourself. Have them cut into the state when you're there so you don;t find out ten minutes after everyone else is finished. Flag down management and order a recook and have the manager walk it to the table.

If you can't do that, then don't expect the customer to understand because you are in control of the situation even if you don't think so.

adamrussell
adamrussell

Dont attempt to tell me what Im tipping for.  Im not tipping big for the service of carrying a plate from the kitchen to my table.  Im tipping for a decent dining experience.  What does it matter to me if the waitress is on time if my meal isnt?

us_1776
us_1776

Wrong.  The staff in the kitchen works just as hard as the servers making sure the customer experience is a good one.  If the tips are shared with all workers then everyone polices everyone else making sure that everyone does a good job.

.

jemileesmom
jemileesmom

Then the staff in the kitchen should recieve the same low hourly pay that a server does.

davidhoffman
davidhoffman

Many people do not realize that under the wage laws waitstaff or other tipped positions can be paid 50% of the standard mimimum wage.  Sure the restaurant is supposed to, by law, make up for undertipping by customers, but that usually does not do as much financially for the person as decent tippers do.  Mandatory sharing of tips with non tipped positions may be illegal, and relieves the owners of some of the responsibility to pay decent wages to the back of the house. I know several waitpersons who quit certain restaurants because the management was sharing the tip income with the entire back of the house. Yes, line cooks were getting a portion of waitstaff tips.  It was the owners concept of profit sharing.

Jessica
Jessica

 Which they usually don't.