A low volume, high quality source from the demand side perspective.The podcast is produced weekly. A transcript is posted on the day of.

Sunday, August 19, 2012

Transcript: 514 Barofsky on TARP

brought to you by Demand Side the Book, Demand Side Minds, available on Amazon, in Kindle. Look for the links at DemandSideBooks.com.

As John Maynard Keynes revealed seventy-five years ago.

“When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done”

Neil Barofsky, former Special Inspector General for TARP ahs a new book out. title: Bailout. Subtitle: An inside account of how Washington abandoned Main Street while rescuing Wall Street.
Listen to this episode
The casino markets are in full flower, and the biggest players own the House.

In Europe where the banks are increasingly exposed to sovereign debt that is wilting in the desert of austerity that they, through the ECB, demand, the call is ever louder for an American-style TARP. You heard it here last week from Carl Weinberg. The success of TARP -- the Troubled Asset Relief Program -- is confined to the prosperity of the big banks.


We’ll get to the full audio in a moment. But the point is well taken. Congress intended TARP to lead to a recovery of the economy. Didn’t happen. Millions of homeowners, millions more unemployed workers, and tens of millions of taxpayers are on the hook for a program that is not working.

It is increasingly apparent that the Treasury under Tim Geithner, the White House and the Fed have one constituency -- the banks. Help for homeowners and a recovery of the real economy was only necessary smoke to funnel largesse of all kinds to the banks. “Foaming the runways for the banks,” is what we hear officials call it through Barofsky. That in reference to the half-hearted help for homeowners. Extend and pretend until the fortress balance sheets can be repaired.


The special inspector general’s website is useful. Get that link on the transcript.


Like millions of Americans worried over their shrinking retirement funds, I relied on www.sigtarp.gov to find the truth about where our tax dollars were going and to whom.

Barofsky’s book gives us an inside and in depth look a the obstruction and aggressive trench warfare he found when he came to Washington to oversee the program. He paints the picture in detail, of a Treasury under Tim Geithner devoted to the banks and to blocking effective oversight of TARP.

The program ballooned from $700 billion into $23.7 trillion in commitments by various federal agencies, which with eerie precision avoided preventing a tsunami of evictions, foreclosures, fraud, blighted neighborhoods and homelessness. Barofsky correctly fingers Treasury Secretary Timothy Geithner, abetted by a timid White House and the regulatory capture we heard about here.

As he says at the end another financial blow-up is inevitable absent fundamental reform and restructuring of global finance. Which means it is inevitable.

It is amusing to hear economists yearn for stronger spending by the consumer. That prescription would be a lot easier for consumers to follow if they had some money. Indeed, where credit is extended -- as in autos -- there IS spending. But consumers don’t have money. The banks and the corporations have the money. They are holding onto it.

This month the numbers are slightly better. Last month they were slightly worse. The economy is on the mat, not on the mend.

The policy now in force is not a route out of the malaise. Nor are any of those in prospect. It is like looking to the west for the sunrise.

The political drama is a battle between do nothing and do damage, a fight between the Obama version of Reaganomics and the return of the Republican Old Guard intent on doing actual damage.

We have the template: direct government employment or subcontracted employment to get people to work in the real economy, a renegotiation of mortgages to realistic prices to get the housing market going, straightforward regulation and restructuring of the financial sector. It was done in the New Deal and it worked. The recovery of the 1930s was actually better year over year than this one.

It is our great good fortune that not all of the New Deal institutions have been dismantled. Social Security and Unemployment Insurance survive, among others. Medicare from the 1960s provides essential security to a population retiring into uncertainty. Without these programs, we would be in worse shape. Should the U.S. follow Europe into the madness of austerity, there is no telling where we will end up.

Now we have the toxic cloud of climate change rolling over us and nobody is mentioning it. Addressing climate change full on could create the value needed to finance the effort, and the millions of jobs Read about it in Demand Side the book.. Instead we put it all on red thirty-two, even thoguh we know the guy with the Dimon earring has rigged the wheel.

And we’re surprised when we lose.

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