Neil Barofsky on TARP’s record, HSBC and lessons for Canada
By Charles Reinhardt - Wednesday, January 9, 2013 - 0 Comments
Neil Barofsky, then Special Inspector General for the TARP, testifying before Congress in April 22, 2010. (Harry Hamburg/AP Photo)
Neil Barofsky was the Special United States Treasury Department Inspector General for the Troubled Asset Relief Program, or TARP, the U.S. government’s $700bn program created in 2008 to shore up the U.S. financial system. He resigned in March 2011, criticizing “Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals” in a scathing New York Times op-ed. He is the author of Bailout. How Washington abandoned Main Street while rescuing Wall Street. Today Barofsky is an adjunct professor and senior research fellow at the New York University School of Law.
Listen to Charles Reinhardt in conversation with Neil Barofsky:*
*Please note: Both the podcast and the interview transcript have been edited for brevity.
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INTERVIEW:
In an article for Bloomberg you wrote in July 2012 you pointed out that the top U.S. banks are 23 per cent larger today than before the crisis and control fifty two percent of all industry assets. Is the U.S. financial system more vulnerable than it was in 2007, and, if so, what went wrong in your view?
A lot of the things that were broken in our financial system, that helped create the massive financial crisis from which we’re still recovering, are still in place, and in some ways have actually gotten more severe. We had a problem with banks that were too big to fail, and as you just noted, they are even bigger now than they were. They had too much political power, too much regulatory influence over their own regulation back then, and I think what we’ve seen with recent events is that that power too has expanded along with its size.
We see a level of deference from Washington that really, fundamentally, hasn’t changed all that much. There’s maybe a difference in some of the public and political rhetoric, but when it gets down to brass tacks, the banks are still calling a lot of their own shots.
Now on the flip side, the banks themselves are in better shape, thanks to the multi-trillion dollar nature of the bailouts, than they were on the eve of the financial crisis. They’re still under-capitalized but they have more capital than they did then, they’re out of some of the more risky parts of their business, at least for now, and they’ve gone through at least some of those troubled assets, though not nearly enough. So in another aspect, they are in better shape than they were in 2008 going into the crisis, but overall our system and the structures of our system are still very very vulnerable to a systemic shock and another financial crisis, and I think because they’re larger, and because the United States has used up so much of its fiscal gunpowder dealing with the past crisis and trying to pay for the recovery, we’ll have a lot fewer options when that next crisis strikes.
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Flaherty in for a fight over fiscal restraint
By John Geddes - Friday, September 9, 2011 at 10:39 AM - 15 Comments
Prime Minister Stephen Harper’s government has prided itself on being a player at the highest levels of international economic decision-making since the frightening fall of 2008. But with the world economy again looking vulnerable, Harper might have to choose between retaining that position of influence and sticking resolutely to its fiscal-austerity plan.
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Why the U.S. needs to take a long, hard look at the size of its government
By the editor - Thursday, August 18, 2011 at 10:20 AM - 0 Comments
The real issue is not how to keep credit rating agencies compliant with official thinking, but how to return the American economy to the robust and dynamic powerhouse it has been throughout its history
Reuters/Larry Downing
Prohibitions against shooting the messenger have been forgotten in the midst of the current financial crisis.
Last week Standard & Poor’s credit rating agency expressed publicly what everyone has been thinking for some time: that the United States does not have a credible plan to address its mounting deficit and debt. Net federal government debt as a percentage of GDP is predicted to rise from 74 per cent to 85 per cent by 2021. (Canada is at 34 per cent.) As a result, S&P stripped the U.S. of its AAA credit rating.
Reaction from the White House was furious. Treasury Secretary Tim Geithner said, “S&P has shown really terrible judgment and they’ve handled themselves poorly, and they have shown a stunning lack of knowledge about basic U.S. fiscal math.” Yet any complaint that the rating agency is being too tough on Washington is the height of hypocrisy.
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Newsmakers '09: Mr. Turnaround, Tim Geithner
By Jason Kirby - Tuesday, December 8, 2009 at 6:16 PM - 0 Comments
U.S. Treasury Secretary Tim Geithner
The most terrifying seat on a roller coaster is always the one right at the front, and no one has had a more stomach-churning perch from which to view the plunges, twists and turns of the financial crisis than U.S. Treasury Secretary Timothy Geithner. Now, with the wild ride levelling out and stability returning to the economy, the man whom hard-liners on both the left and right were calling a “disaster” a few months ago is being credited with helping put the U.S. back on track. When Warren Buffett declared the financial panic over this month, he said that Geithner, with Federal Reserve chairman Ben Bernanke, deserves “high marks” for how he handled the crisis.Of all the predictions about the fate of the global economy made during the darkest hours of the financial crisis—“There will be blood,” the historian Niall Ferguson pronounced—few thought that 250 days later we’d be where we are today. America’s economy is growing again, unemployment is slowing and consumer confidence has rebounded from lows not seen in half a century. Through a barrage of stimulus spending and tough measures that forced troubled banks and automakers to restructure, Geithner ultimately succeeded in giving America some of its confidence back. Continue…
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The Bully Pulpit: Benefits and Risks
By John Parisella - Monday, March 23, 2009 at 7:00 PM - 7 Comments
Obama is everywhere these days. But is he running the risk of overexposure?
So far, it is fair to say that Obama firmly believes the presidential bully pulpit is the way to go. He has already scheduled a second primetime press conference for this week and, given his weekly radio and Internet addresses, we can safely assume media exposure is not a concern to him. The question is, how long can this go on? Is he not running the risk of overexposure?
Theodore Roosevelt was the first to describe the presidency as a “bully pulpit.” The White House, he figured, provided an ideal platform for speaking directly to voters and above the heads of those in Congress. The occupant of the Oval Office is at the center of government and has particularly easy access to the media, which can be used to cajole invitations, advance policy and defend actions. Successors like FDR, JFK, and Ronald Reagan were able to push the bully pulpit far beyond what Theodore Roosevelt imagined.
