Archive for the ‘Neil Barofsky’ Category
Total US Government Financial Support At $3.7 Trillion
July 21st, 2010 | 
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Good thing we taxpayers have nothing else to spend our money on but propping up insolvent financial institutions and paying for homes people can’t afford.
US financial system support up $700 bln in past year-watchdog
* Total US govt financial system support seen at $3.7 trln
* US support swells by $700 bln in past year-watchdog
* Mortgage, housing commitments account for most of rise
* TARP watchdog criticizes Obama housing rescue efforts
By David Lawder
WASHINGTON, July 21 (Reuters) – Increased housing commitments swelled U.S. taxpayers’ total support for the financial system by $700 billion in the past year to around $3.7 trillion, a government watchdog said on Wednesday.
The Special Inspector General for the Troubled Asset Relief Program said the increase was due largely to the government’s pledges to supply capital to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) and to guarantee more mortgages to the support the housing market.
Increased guarantees for loans backed by the Federal Housing Administration, the Government National Mortgage Association and the Veterans administration increased the government’s commitments by $512.4 billion alone in the year to June 30, according to the report.
“Indeed, the current outstanding balance of overall Federal support for the nation’s financial system…has actually increased more than 23% over the past year, from approximately $3.0 trillion to $3.7 trillion — the equivalent of a fully deployed TARP program — largely without congressional action, even as the banking crisis has, by most measures, abated from its most acute phases,” the TARP inspector general, Neil Barofsky, wrote in the report.
The total includes Federal Reserve programs and a myriad of asset guarantees, including Federal Deposit Insurance Corp. protection for bank deposits.
The increased government commitments more than offset about a $300 billion decline in the U.S. Treasury’s TARP commitments in the past year as programs have closed and banks have repaid taxpayer funds.
HOUSING PROGRAMS CRITICIZED
Barofsky also in the report ramped up his criticism of the Treasury’s housing relief efforts, saying that its program to reduce monthly mortgage payments for struggling homeowners was showing “anemic” participation numbers and had failed to “put an appreciable dent in foreclosure filings.”
He said Treasury had refused his repeated recommendations to announce more effective goals and benchmarks for its mortgage modification program, which could reach up to $50 billion in TARP funds.
“Treasury’s refusal to provide meaningful goals for this important program is a fundamental failure of transparency and accountability that makes it far more difficult for the American people and their representatives in Congress to assess whether the program’s benefits are worth its very substantial cost,” Barofsky wrote.
Among other recommendations repeated in the report, Barofsky called for the Treasury to consider making its voluntary mortgage principal reduction program mandatory, saying this would make it less likely for “underwater” homeowners to abandon their properties.
The Treasury has declined to adopt the recommendation, citing the prospect that mandatory principal reduction would cause mortgage servicing firms to opt out of the program and fairness issues in reducing principal for both responsible homeowners hit by value declines and homeowners who overleveraged their properties in refinancings.
U.S. Treasury officials defended the Home Affordable Modification Program, saying that it was still on track to reach its goal to keep 3 million to 4 million homeowners in their homes by the end of 2012 and was adapting to changing conditions by offering forbearance to unemployed people and extra funding for the hardest-hit markets.
Herbert Allison, Treasury assistant secretary for financial stability, said the Treasury often agrees with Barofsky’s recommendations, “but once in a while, we differ on what type of policy will best carry out our mandate.”
The report provoked swift criticism of Obama administration housing policies from U.S. Rep. Darrell Issa, a California Republican who has taken every opportunity to blast the Treasury’s handling of financial bailout programs.
“The fact that the Obama administration is treating TARP like its own personal slush-fund is beyond egregious and a complete betrayal of what the American people were told would be then when their tax-dollars were used to bailout Wall Street,” Issa said in a statement, adding that the housing efforts were “dumping good money after bad”. (Reporting by David Lawder; Editing by Kazunori Takada)
Posted in Bad loans, Banks, Economic Crisis, Economy, Financial System, Government, Mortgage Loans, Neil Barofsky, TARP, Taxpayer, bailouts, bank bailouts | 
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Gov’t Watchdogs: Mortgage Program is Not Working
Bailout watchdogs say Obama’s $50B mortgage program is struggling and could hurt the recovery
WASHINGTON (AP) — Government watchdogs are telling a Senate panel that the Obama administration’s multibillion effort to help at-risk homeowners avoid foreclosure is not working and could put the economic recovery at risk.
Special inspector general for the financial bailouts Neil Barofsky said Wednesday that the program has not “put an appreciable dent in foreclosure filings,” during a hearing on the $700 billion bank bailout before the Senate Finance Committee. He also said the Treasury Department has ignored earlier demands that it set clearer goals for the program.
Elizabeth Warren, who chairs a separate Congressional Oversight Panel on the bailouts, said Treasury’s failure to act more quickly could be hurting the recovery.
More foreclosures could force down the price of homes and further hurt the already-ailing housing industry.
The homeownership program aims to reduce mortgage payments for millions of homeowners who can’t afford their monthly bills. Recent data suggest it has helped about 400,000 households avoid foreclosure. About 530,000 have fallen out of the program.
The bailout has provided up to $50 billion for the mortgage modification programs.
Barofsky said Treasury is giving mortgage companies too much leeway to decide which homeowners will qualify for a program to reduce the principal balance of their mortgages.
The program relies on voluntary cooperation from mortgage companies, Warren said. She said many of the mortgage debt collectors make more money when they foreclose than they do when helping homeowners.
“We have a crisis, and the consequences of not having cooperation from (mortgage) servicers is . . . felt by this entire economy,” Warren said. “We need a program with far more urgency and some real teeth in it.
Also appearing at the hearing is a leader of the Government Accountability Office.
Their three offices are designated to provide transparency and oversight for the bailout program that Congress passed in October 2008.
Posted in Economic Crisis, Economy, Financial System, Government, Neil Barofsky, bailouts |
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Geithner May Be CRIMINALLY Charged?
Geithner May Be CRIMINALLY Charged?
Posted by Karl Denninger
The TARP watchdog has also criticized Treasury Secretary Timothy F. Geithner in reports and in congressional testimony for his handling of the process by which insurance giant American International Group Inc. was saved from insolvency in 2008, when Geithner was head of the Federal Reserve Bank of New York.
The secrecy that enveloped the deal was unwarranted, Barofsky says, adding that his probe of an alleged New York Fed coverup in the AIG case could result in criminal or civil charges.
I have written extensively on this matter over the last 18 months and, in my opinion, such an outcome falls under the category of “it’s about damn time!”
Then there’s this:
Barofsky, a former federal prosecutor who was once the target of a kidnapping plot by Colombian drug traffickers, says he’s also looking into possible insider trading connected to TARP. He says his agency would want to know if bankers bought stock in their companies before it was made public that their institutions would get TARP money, for example.
“There was a time when, if you got that word the stock price would go up, and if you were to trade on that information prior to the public announcement, that would be classic insider trading,” Barofsky says.
That ought to be easy. Just subpoena yourself some trading records along with the emails and communications of bank executives. Bingo – I bet you find dozens of instances there.
“There’s a reason there are Tea Partiers out there, and when you look at it, anger at the bailout is one of the first things they talk about,” says Barofsky, referring to the anti- Obama political movement. “This Treasury Department and the previous Treasury Department bear some of the responsibility for not being straightforward with the American people.”
The Tea Partiers (and the American people generally) are angry because of the rampant looting of the American public and taxpayer that has taken place over the last three years.
These institutions should have all been dismantled. If it was deemed to be “necessary” to keep the firms in existence then break ‘em up, fire the entire executive suite and instead of six firms give us sixty – break each into 10 pieces. Even better, split off their depository functions and sell them to community and regional banks that did not participate in the Wall Street games!
It appears that Barofsky is looking into the issues raised by my previous Ticker on Goldman and the synthetic CDO issue as well:
“It is securities fraud if you take securities and package them and knowingly pass them off with phony labels,” she says.
Barofsky says investigations related to the underwriting and sale of CDOs are ongoing.
You betcha it is.
Posted in Banks, Corruption, Economic Crisis, Economy, Financial System, Fraud, Neil Barofsky, SIGTARP, Timothy Geithner |
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US Banks Face Insider Trading Probe
US Banks Face Insider Trading Probe
By Tom Braithwaite in Washington
Neil Barofsky, the special inspector-general overseeing the US government’s financial rescue efforts, is to probe allegations of insider trading among bank executives and their associates.
Eight of the largest banks in the US received between $2bn and $25bn in October 2008 under a programme to prop up the financial system led by Hank Paulson, then Treasury secretary.
Dozens more institutions followed and Mr Barofsky, who examines the troubled asset relief programme, is looking into whether information improperly made its way to trading rooms during a feverish period in which the government and banks were frequently exchanging information.
“We have pending investigations looking into that – typically into insider trading,” he said. “Once upon a time getting Tarp funds actually meant your stock price would go up and we are looking at specific trading around Tarp announcements by insiders or looking at potential tips from insiders.”
Sig-Tarp, the office of the special inspector-general, published its quarterly report to Congress on Sunday, criticising the capital investments in banks as having failed to stimulate lending.
“Part of the problem is, when the Tarp funds were extended . . . although there was this public disclosure that the purpose of these programmes was to increase lending, very little, if anything, was done to encourage or direct lending,” said Mr Barofsky.
The Treasury is celebrating faster than expected Tarp repayments from the financial sector; it now expects relatively small losses, with some elements generating big profits.
While Mr Barofsky acknowledges this, he said there remained substantial problems with the struc-ture of the public-private investment programme, which is designed to encourage investors to buy troubled assets from banks to clean their balance sheets and stimulate lending.
He said there should be walls between fund managers taking part in PPIP, which co-invests government funds with those of the private sector, and managers at the same firm buying and selling similar securities.
An example of suspicious activity at an unnamed firm showed a manager selling a security from a non-PPIP fund and then buying it back at a slightly higher price with a taxpayer-supported PPIP fund minutes later.
“The rules are insufficient,” said Mr Barofsky. He said even if the behaviour, which Sig-Tarp is investigating, was found to be within the rules “it still creates this credibility issue, this reputational damage, this appearance of fund managers gaming the system”.
The Treasury said it had identified the suspicious behaviour and brought it to the attention of Sig-Tarp, showing that the system was transparent.
In another example of the sometimes fractious relationship with Treasury, Herb Allison, the Treasury’s head of Tarp, said that Ken Feinberg, the so-called pay tsar, had initiated contact with the New York Federal Reserve to discuss pay at AIG long before Sig-Tarp had made the recommendation in a previous report.
Much of Sig-Tarp’s new report is given over to an examination of the housing market and the multitude of government schemes designed to support lending and help homeowners avoid foreclosure.
“The government has done more than simply support the mortgage market,” the report said. “In many ways it has become the mortgage market with the taxpayer shouldering the risk that had once been borne by the private investor.”
Mr Barofsky added: “All of the things that were broken in the housing market and the different roles that different private players have played, some of what we recognise now . . . actually contributed to the bubble and to the ensuing crisis are really being replicated by government actors.”
His latest report said Tarp was entering a transition as financial aid for banks including Bank of America and Wells Fargo & Co was recouped.
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Posted in Banks, Corruption, Economic Crisis, Economy, Financial System, Neil Barofsky, SIGTARP |
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