The Treasury's Don't Ask, Don't Tell Program for the Financial World

One fact is no one knows what the hell is going on with U.S. taxpayer dollars and what the U.S. Treasury as well as the Federal Reserve are doing with it.

This hearing, is a TARP Inspector General Report hearing, otherwise known as Don't ask, don't tell.

Following the Money, Part I

 

The House Oversight Committee's hearing, Following the Money: Report of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) has some shocking testimony, with the TARP inspector general comparing TARP to running a Madoff Hedge fund.

Yesterday Inspector General Barosky's testimony was released, along with the mind numbing headline, $23.7 trillion dollars of financial commitments have been made by the U.S. government surrounding the financial crisis.

In Big Estimate, Worth Little, the New York Times absurdly amplifies how the $23.7 trillion number is everything under the sun and if the U.S. actually was on the hook for this large of a sum, all assets would have to be deemed worthless.

That said, does it matter? Even if $12 trillion was lost that would destroy the United States.

The article notes the U.S. Treasury Department, Williams said:

He added that the United States had spent less than $2 trillion so far, and that much of that was backed by valuable assets.

and the New York Times wryly notes it may be the first time that $2 trillion appears to be a small number.

So, we are getting argument over the scale of these numbers instead of the focus on how the U.S. Treasury is seemingly not minding the U.S. taxpayer store and it's just a financial pig fest with no transparency or accountability.

Committee Chair Edolphus Towns (D-NY-10), opening statement:

Today we will hear from the Special Inspector General
for TARP, Neil Barofsky, as he presents his quarterly report
to Congress. His findings, quite frankly, are astonishing.

According to the IG, “the TARP has become a program in which taxpayers:

  1. are not being told what TARP
    recipients are doing with their money
  2. have not been told what their investments are worth
  3. will not be told the full details of how their money is being invested

So, the Treasury Department isn't even asking recipients what they are doing with our money!

Ya know, by any stretch of the imagination, this is purely outrageous. I'm sorry but these are public funds and the Treasury and the Federal Reserve are acting like it's all perfectly acceptable to take our money and simply hand it over to a select group of financial companies!

Also described in the hearing are how there are no firewalls between BlackRock and other 9 firms managing assets for the U.S. treasury via public contracts and these companies private investment activities. In other words, while one is managing a toxic asset fund via contract, these same employees are trading in open markets. Now someone explain how that is not the ultimate insider trading game?

Treasury has hired nine private firms to be asset managers for the Public-Private Investment Program. All of these large firms are engaged in extensive private investment activities.

According to the Special IG, this arrangement is vulnerable to conflicts of interest, collusion, and money laundering.

Another point in the hearing Q&A is Bank of America took their TARP and invested in the Construction Bank of China. How American of them!

Rep. Kucinich pointed to this Bloomberg article, where buried in paragraphs is the fact the Federal Reserve is sitting on funds and banks are not lending.

Banks’ excess reserves at the Fed rose to a record $877.1 billion daily average in the two weeks ended May 20, from $2 billion a year earlier. Excess reserves -- money available for lending that banks choose to leave with the Fed instead -- averaged $743.9 billion in the first two weeks of this month.

Here (large pdf) is the SIGTARP's quarterly report to Congress for further study.

Closing Statement of Chair Towns:

The Treasury Department needs to publish full and detailed information on the use of TARP funds and publish the value of the TARP portfolio on a monthly basis. They have that information and they should make it public.

Moreover, Treasury also requires the largest banks to file monthly reports showing the dollar value of their new lending. That should be made public also.

If Treasury doesn’t put this information up on its website, this Committee will. And if Treasury doesn’t turn over this information voluntarily, Secretary Geithner will be brought before the Committee to explain.

What we have heard today convinces me that one of the best things Congress did when it created the TARP was to also create the Special Inspector General to oversee TARP spending. I can now understand why the Treasury Department would like to rein in the SIGTARP. But we are not going to let that happen.

I sure as hell hope so. What a labyrinth of corporate oligarchy and obfuscation. If the SIGTARP Inspector General, where this is his job, cannot figure out what the hell is going on and is even further shut down, the American public don't have a prayer's chance on finding out what happened with trillions of their dough.

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Comments

Robert, Robert. My Blood pressure is Already Boiling.

Let's look at what is at risk with the zombie banks, Fannie and Freddie and AIG:

1) CIT - $2.3 billion
2) Citigroup - $50 billion
3) Bank of America - $50 billion
4) Fannie and Freddie - $84.9 billion
5) AIG - $69.83 billion

That is $257 billion (if my zeroes are correct) at risk. That would have been a nice down payment on health care reform!

Not to mention the regional banks that received TARP and are at risk because of commercial real estate.

Don't forget that the Fed's balance sheet keeps taking big hits from all these assets it bought in the various Maiden Lane schemes that are practically worth less.

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there is too much material

here to write information up quickly. Frankly I need to review a lot of this to get a real numbers tally. I think your estimates are way, way too low..

but don't you find it all absurd that they are blasting any sort of single payer health claiming it's so expensive with these kind of numbers and you're in the realm where the U.S. truly may never get the money back (unlike the $23.7 trillion estimate, which is very black swan). But even just a few facts that come out is enough to give one a stroke. It's no wonder people go into denial on it for it's so complex, multi-facted and the numbers being reported simply cannot be imagined in size or scale.

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That $257 billion is money truly at risk in my opinion.

Meaning there is a strong probability of default risk - that we will not get the money back. And like I said it is just those zombies and Fannie/Freddie and AIG. I wonder whether Wells Fargo can survive.

The numbers come from ProPublica's website.

This is class warfare (there I said it) - it is OK to bail out financial oligarchy to the tune of at least $12 trillion but when it comes to providing health insurance for over 40 million Americans - OH it's too costly.

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I don't think you can just tally up funds

but have to go into the losses, i.e. Treasury sold warrants at 66% of their market value. AIG paid out $20B @ 100% on CDS to counterparties. But then, we have AIG selling assets, so who gets that money from those sales?

So, one cannot just look at the amounts but what are the real losses. I've scanned through the SIGTARP report to some degree but it's 256 pages, so check out the actual report to see if there are more information.

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I will take a look at the report.

And I don't mean to be argumentative. For example, we gave Citigroup - $50 billion. They gave us warrants and preferred stock which has been converted to common stock.

If Citigroup goes under, as common stockholders, we will probably see none of that $50 billion. I could assign a probability of bankruptcy to that $50 billion. But that was my rationale. Same goes for the rest of the TARP recipients.

I agree that there are other aspects of loss and exposure that go beyond the hard numbers. For instance, what is truly the value of this collateral or "valuable assets" that have been offered up in these various programs.

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right

but even when a bank goes under the assets are not valued at zero. i.e. if there are bank accounts there, they don't disappear.

Even when a company is bankrupt, to the point of liquidation, those assets being liquidated has value so (it would be easier though) one cannot say $50B is guaranteed gone....although just because there are assets....doesn't mean the taxpayer money isn't totally gone never to reappear either.

So, the priority queue in bankruptcy is bonds, then preferred, then common, so even then it doesn't mean "gone to zero" although it could. I fear more Zombie Citigroup will stay afloat indefinitely never the U.S. taxpayer is never actually repaid.

Then, ya know it terms of what other market manipulations are going on, there are probably indirect losses there as well.

A new bill to demand warrants are on an open market was introduced, H.R. 3232. This is where Treasury got 66% vs. market value.

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