It's a Sad Day for TARP - Barofsky Resigns from IG of SIGTARP

Well, for those of you that haven't already read the news, Neil Barofsky, Inspector General of SIGTARP is stepping down. I've enclosed the resignation letter for all to see, as it's an interesting read, particularly when you consider that Barofsky was awarded full immunity from everyone when it came being able to do as he pleased in order to do his job.

What bothers me, particularly in light of the resignation, is that when you look at Barofsky stepping down coming right off the heels of Kevin Warsh's resignation (and opening on a seat at the Fed table for another yes man) and the resignation of Bundesbank head Axel Weber, you have to wonder what is going to happen to the balance of power in a QE-Laiden world. Warsh, who sat on the Federal Reserve Board of Governors, was opposed to QE2 (and it's likely successor of QE3, which will be inevitable) and was repeatedly looking to raise interest rates. While he didn't vote against it, he was the lone member to routinely and openly express his dissatisfaction with the plan. Axel Weber, while I'm not to familiar with the Bundesbank, was openly opposed to IMF/European Bailouts. Barofsky, well... he was a unique case.

Barofsky was a presidential appointee for the SIGTARP position. He was given a free and clear ability to do as he pleased when it came to investigating the TARP program and was known to be an outspoken critic of it and how parts of the bailout were handled. The man was not only a thorn in the side of Wall Street, but a thorn in the side of Geithner and the Obama Administration. Hopefully his replacement will be able to be as outspoken and critical of things as he was. Hopefully his replacement won't be a pushover and a shill. Most important, I hope his replacement will be constantly reminded of the fact that SIGTARP is an independant organization, with no ties to the Secretary of Treasury and reports solely to the House Oversight Committee.

Mr. Barofsky, enjoy your retirement. You will be missed.

The resignation letter is as follows:

President Barack Obama
The White House
1600 Pennsylvania Avenue, NW
Washington, D.C. 20500

Dear President Obama:

I am writing to notify you of my intent to resign, on March 30, 2011, as the Special Inspector General for the Troubled Asset Relief Program. It has been an honor and a privilege to serve.

The Office of the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) was created by the Emergency Economic Stabilization Act of 2008 (“EESA”), the same Act that created the Troubled Asset Relief Program (“TARP”). In November 2008, I was nominated by President Bush, with the assent of your transition team, and I was confirmed unanimously by the United States Senate on December 8, 2008. When I took office on December 15, 2008, SIGTARP consisted of just myself and a single employee working out of a small office in the basement of the Main Treasury building; since then, SIGTARP has grown into a flourishing independent office employing more than 140 highly skilled auditors, investigators, attorneys, and other professionals with its own dedicated office space in downtown Washington, D.C., and field offices in New York, San Francisco, Los Angeles and Atlanta.

When it began, I had three goals for SIGTARP: to build a robust law enforcement agency to bring to justice those who sought to profit criminally from TARP and to deter those considering such misconduct; to ensure transparency in the operation of TARP so that taxpayers could better understand how the Government was utilizing the unprecedented investment of taxpayer funds that TARP represented; and to provide effective oversight over the Government’s decision-making process to minimize instances of waste, fraud and abuse. I believe that SIGTARP has met each of these goals.

As the sole TARP oversight body with law enforcement authority, SIGTARP has developed an Investigations Division with perhaps the finest collection of white-collar criminal investigators ever assembled. The results have been rapid and tangible, with SIGTARP’s investigations already leading to the criminal conviction of 14 individuals for fraud, more than $550 million in fraud losses avoided, and more than $150 million recovered, ensuring that SIGTARP will more than pay for itself for its entire existence. SIGTARP is also the lead law enforcement agency in the criminal investigation and prosecution of Lee Farkas, the former Chairman of Taylor Bean & Whitaker, whose multi-billion dollar fraud indictment arguably represents the most significant criminal prosecution to date arising out of the financial crisis. Going forward, with more than 140 ongoing investigations across the country, SIGTARP’s Investigations Division is poised to broaden its impact even further and to bring scores of additional defendants to justice for their attempts to take criminal advantage of the Nation’s financial crisis.

SIGTARP has promoted transparency through 13 published audits and nine quarterly reports to Congress. SIGTARP’s audit reports have delivered to the American people and their representatives in Congress detailed accounts of the extraordinary steps taken by their Government to respond to the financial crisis, the rationale behind those decisions, and the important lessons to be learned from them. Through SIGTARP’s quarterly reports to Congress, SIGTARP has helped quench the American taxpayers’ thirst for information on the expenditure of their tax dollars through TARP. To date, SIGTARP’s website has been visited more than 49 million times as taxpayers have accessed reports that have documented TARP’s successes and failures in easy-to-understand terms while putting TARP into perspective as only a part of the multi-trillion dollar Government effort to stabilize the financial system. These reports have also brought attention to the long-term, nonfinancial costs of TARP, including harm to the Government’s credibility and the very real dangers that plague our financial system with the continued existence of large financial institutions still deemed “too big to fail.”

Thanks in no small part to the dedication of the talented professionals at SIGTARP, TARP stands in a far better and more transparent place today than anyone could have reasonably hoped in December 2008. The anticipated financial costs, while still significant, have fallen dramatically from early projections. One reason for this is that SIGTARP has regularly made, and Treasury has often adopted, recommendations concerning TARP program design that protected TARP against fraud vulnerabilities. As a result, it appears that TARP will experience losses from fraud at a substantially lesser rate than what is typically expected for comparable Government programs. Furthermore, with credible plans to liquidate the Government’s remaining ownership interests in those TARP recipients that are still the beneficiaries of extraordinary Government assistance, the program is well on its way to resolving its most significant and controversial loans and investments.

All told, I am very pleased to report that SIGTARP has had a truly remarkable positive impact for an office of such a small size and recent creation. With my initial goals met and with these particular accomplishments in mind, and after more than 10 years in continuous Government service, I believe that it is the right time for me to step down and pursue other opportunities.

This is not to say, of course, that SIGTARP’s work is complete. Important parts of TARP continue to struggle: more than 150 TARP recipient banks have missed their regular dividend payments, and the Home Affordable Modification Program has so far fallen far short of EESA’s mandate that TARP be used to “preserve homeownership.” Indeed, with more than $150 billion in TARP funds outstanding and close to $60 billion still available to be spent, robust and effective oversight of TARP remains vitally important. There is no question that SIGTARP will continue to lead that effort, through its continued quarterly reports to Congress, its audits, and its ongoing criminal investigations. Indeed, given the important work ahead, I would not be comfortable offering my resignation if not for the great confidence that I have in the leadership team at SIGTARP. That team, lead by the Deputy Special Inspector General, Christy Romero, is fully prepared to continue advancing SIGTARP’s mission.

It has truly been an honor to serve, particularly during such a critical time, and I will always be thankful to you for allowing me the opportunity to do so.

Sincerely,

Neil M. Barofsky
Special Inspector General

cc: Chairmen and Ranking Member of Committees of Jurisdiction
Secretary Timothy F. Geithner