Former TARP Inspector general's new memoir is one of the few honest accounts of the chronic Beltway dysfunction behind the bailout
Neil Barofsky isn't going to like this, but the first person I thought of when I read the former TARP Inspector General's book, Bailout, was G. Gordon Liddy. Not that he has anything in common politically with Nixon's fanatical arm-roasting hatchet man, but after reading Bailout I had the same thought I had after reading Liddy's memoir, Will – that every now and then, a born writer ends up in some other, far more interesting profession, and we don't find out about it until he or she is forced for some reason to write a book.
Bailout has its first paperback release this week, and Barofsky accordingly is making the media rounds (check out Comedy Central tomorrow), where he'll mainly be asked about the political revelations in the book. You know, the inside-baseball stories of how the officials who administered the TARP bailout fought transparency at every turn, failed to do due diligence on the health and viability of bailout recipients, seemed totally uninterested in creating safeguards against fraud, and generally speaking spent more time bitching about the media and plotting against the likes of Elizabeth Warren and, eventually, Barofsky himself than making sure the largest federal rescue in history wasn't a complete waste of money.
As the former Special Inspector General of the TARP, a key official who was present at the highest levels throughout most of the bailout period and saw from the inside how both the Bush and Obama administrations attacked the economic collapse, Barofsky does have that story to tell, and the book unsurprisingly is full of historically weighty scenes and factoids that will be culled by reporters like me for years to come.
But there's a secondary and I think more interesting subplot to this book, a personal story that will give it more staying power. Just like Will was really a journey-of-self-discovery story that just happened to have the Watergate burglary as a backdrop (the book's real climax comes in the post-Watergate prison years, where Liddy really "finds himself"), Bailout is a kind of Alice in Wonderland tale of an ordinary, sane person disappearing down into a realm of hallucinatory dysfunction, with Tim Geithner playing the role of the Mad Hatter and Barofsky the increasingly frustrated Alice who realizes he's stuck at the stupidest tea party he ever was at.
Though you would think it would be an angry book, Barofsky describes his experiences with a wry, anthropological detachment, almost in awe at these strange and irrational characters who seem so obsessed with intramural squabbles and other irrelevancies (when the newly-appointed Barofsky asks for advice from the Treasury Department's Inspector General, Eric Thorson, Thorson's first tip, delivered in total seriousness, is to get an account at the Treasury Dining Room, where a presidential appointee can get good food at cheap prices) while the world economy is melting down all around them.
The book is full of morbidly funny scenes, like for instance when Barofsky describes his inner trepidation in taking the oath of office on the extremely religious Hank Paulson's personal Bible:
Paulson is famously a devout Christian Scientist and as I put my Jewish hand on the Paulson family Bible, I fleetingly pictured it bursting into flames . . .
In that same surreal scene, Paulson, in his first meeting with Barofsky, rambles on about the decisions he's faced with, including whether or not to use TARP funds to rescue the auto industry. Barofsky listens politely, believing he's just accidentally present while an important official is thinking out loud, when suddenly Paulson looks at him. "So what do you think?" Paulson asks.
This moment underscores the randomness that seems to have permeated a lot of bailout policy. Barofsky realizes that Paulson is actually asking advice of a career criminal prosecutor – a man he's only just met, who knows nothing about the subject – on whether or not to bail out Detroit. "What do I think?" he wonders to himself. "I think the only thing I know about the domestic automobile industry is that sweet '95 Chevy Camaro I parked outside."
Another section reads like something straight out of Goldilocks and the Three Bears. Barofsky has it explained to him that an Inspector General shouldn't be too much of a "junkyard dog" ("You don't want to be seen as promoting yourself") and you don't want to be a "lapdog," either (because Congress will get upset and drag you over the coals if they find out you're playing golf with the people you're supposed to be policing). Instead, an IG should be porridge whose regulatory temperature is "just right" – a "watchdog," which in Washington parlance means you want Congress to know you're doing something, but you don't want it to think that it owns you.
Again, all of this advice Barofsky gets has nothing to do with what's best for, you know, the actual country – maybe, in this circumstance, the country needed a "junkyard dog" in that spot, but that's not the way things are done inside the Beltway. According to the twisted logic of this place, your goal is to find a happy medium, where you don't anger too many of the people in the agency you're supposed to be policing, but you also don't go so soft on them that Congress crawls up your rear end.
This is a persistent theme of the book: that Washington is a kind of upside-down world where everyone is all the time frantic about some emergency or other – you can't ever be sure what it is, exactly, except that it almost certainly isn't one of the real-world problems the locals were hired to solve, like the loss of 5,000 points of Dow Jones value in a year or the awesome quantity of toxic/fraudulent loans infecting the books of our major banking institutions. Instead, the characters Barofsky encounters seem to worry endlessly about one-upping each other, not rocking the boat, and avoiding looking like tools in the media and/or to their bosses.
In an early chapter, Barofsky describes a major international drug prosecution against the FARC rebels in Colombia undertaken by the U.S. Attorney's office in the Southern District of New York that gets undermined when the Washington office – apparently afraid that a regional office nailing a major South American cartel would make the main office look like asleep-on-the-job twits – races frantically to prevent indictments from being handed down before they can be put in nominal charge of the case.
In another scene, the Treasury IG, the aforementioned Thorson, scrambles to throw together a last-minute investigation of some schmuck bailout-recipient bank in Beverly Hills before Barofsky's SIGTARP office – which would take over oversight responsibilities from Thorson– was up and running. Thorson conducts a review of the bank's receipt of bailout funds, then seemingly arranges to plant a question with a local reporter about the investigation, which Thorson immediately says, in an email cc'ed to top Treasury officials, that he must respond to – because he has "a responsibility here to have accomplished some work" and that this investigation was "the one job that would demonstrate our required involvement" in the bailout oversight.
In other words, Thorson felt that it was the responsibility of his office to show, to a reporter, that he had actually done something, and not sat on his thumbs while hundreds of billions of dollars were flowing out of Treasury's coffers.
Anyway, in the end, Barofsky suffers an Alice-like end, essentially ejected from the Beltway Wonderland for being different. You remember how Alice was ejected by the King and Queen after giving her evidence – Rule 42, "all persons more than a mile high must leave the court":
"Well, I shan't go, at any rate," said Alice: "besides, that's not a regular rule: you invented it just now."
"It's the oldest rule in the book," said the King.
"Then it ought to be Number One," said Alice.
It's clear by the end of the book that Barofsky is a similar kind of mutant/unwanted smartass in this world, veering way too far into "junkyard dog" territory. His SIGTARP reports on the bailout are unflinchingly critical of the bailout effort, and in particular the glaring discrepancies between what was promised in areas like home mortgage modification and what was actually delivered.
There is an interesting moment when Barofsky and his deputy Kevin Puvalowski realize that, over a year into the bailout, Treasury official Herb Allison, a close confidant of Geithner, has made a subtle change to the language describing the aims of the ill-fated HAMP mortgage modification program. Allison ends up claiming that the goal of the program was only to make 3 to 4 million offers of trial modifications, as opposed to actually helping 3 to 4 million people stay in their homes, which is what the president and the Treasury originally announced.
By the end of 2009, only 70,000 permanent modifications had been completed, a long way from the stated goal. When Barofsky confronts Allison about the problem, he says only that there's a "moral hazard" issue with giving out too many modifications, that expanding the program it isn't fair to people who made their mortgage payments all along.
Obviously, neither Geithner nor Allison ever worried much about "moral hazard" when they were handing out billions in no-conditions cash to irresponsible banks. Barofsky realizes then that the government is not only willing to bend the truth to give itself political cover, but more importantly is essentially unconcerned with fixing the problem of mass foreclosures.
Again, this is a world that is really blind to the fact that it is connected somehow to the rest of the country outside of D.C. – so changing language to make it look like certain goals have been met makes perfect sense, given that nobody outside their fairy-tale bubble really exists to them. It's a kind of creepy collective narcissism captured perfectly by the ever-grumpy Tim Geithner when interviewed by another SIGTARP deputy, Geoff Moulton, who asked Geithner if he could think of any mistakes he might have made in administering TARP.
Geithner thought, then answered:
The only real mistake I can think of is that there were times when we were unnecessarily unsure of ourselves. We should have just realized at the time how right each of our decisions was.
Barofsky left SIGTARP in early 2011. He's teaching at NYU now and after writing this book, essentially unemployable in Washington. That sucks for him, but the benefit for the rest of us is this trippily entertaining account of how crazy Washington is.
If you follow issues like Too-Big-To-Fail or Wall Street corruption long enough, you realize that the reason things don't get done about them by our government has very little to do with ideology or even politics, in the way most of us understand politics.
Instead, it's a bizarre, almost tribal mentality that rules our capital city – a kind of groupthink that makes extreme myopia and a willingness to ignore the tribe's ostensible connection to the people who elected them a condition for social advancement within. Most normal people don't get to see what that place is like, because most of the rearview-mirror accounts of that world are written by people who somewhere along the line became infected by the Beltway disease. Only a few true outsiders make it out alive, and only a few of those write books. This is one of the best.
Editor's Note: Apologies for mixing up Red Riding Hood and Goldilocks. That's freaking pathetic. If anyone's keeping my score this year, that's like ten shame points.