If Neil Barofsky Can't Do It, Then Who Can?
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It's hard to surprise anybody at this point with yet another account of the corrupt and crooked ways of Washington and Wall Street. Neil Barofsky's "Bailout" is a very honest, detailed, entertaining and insightful addition to the existing roster of financial blockbusters. Yes, Wall Street is scheming and self-serving and Washington is full of egos whose immediate concern is short-term political posturing focused on the next election. Tell us something we don't know. When I picked up the book, I thought I was going to learn about what is being done about it. Instead, I found myself navigating a depressing Kafkaesque narrative that still has me looking for answers.
When Neil Barofsky became special inspector general for the Troubled Asset Relief Program in 2008, he had the perfect pedigree for the position. He was a smart, tough, no-nonsense former New York prosecutor who had a number of Wall Street fraud cases under his belt. Moreover, he couldn't be swayed from doing his job, even under physical threat as evident from his successful prosecution of the Revolutionary Armed Forces of Colombia guerrillas. He dived into the swamp known as Washington with fresh energy and enthusiasm, intending to do his job vigorously and honestly. Based on his description of the early days he spent in Washington learning the twisted ways of the game, I almost thought there would be a happy ending to the story. We, as taxpayers, could hardly have a better advocate in Washington: someone who was not beholden by special interests and whose only downside, as Barofsky often points out, was that he would go back home to New York.
During his first year on the job, Barofsky developed a good bipartisan rapport with various Democratic and Republican members of Congress; he built credibility as a nonpartisan official who was trying to do his best to protect taxpayers' money. That's a rare asset to have in Washington – the ear of lawmakers on both sides of the aisle. The Ensign-Boxer Amendment to protect $500 billion to $1 trillion of taxpayers' money from collusion at the Public-Private Investment Partnership program, rolled out in the midst of the crisis to purchase toxic debt from banks, is a good example of a bipartisan legislature agreement with SIGTARP. Over time, he also learned to use the bully pulpit and the power of the press when stonewalled by obstructive Treasury Department officials. No congressman can ignore the story if it's reported by all major newspapers and such press coverage was a smart tool to use to expose the uncooperative Treasury.
This credibility exacted a price. Protective of his integrity, Barofsky failed to recognize that the qualities he took pride in would be used against him in the most obvious and unceremonious manner. Perhaps, Barofsky's dismissiveness of the power of realpolitik proved to be short-sighted. Barofsky, a Democrat, decided to release his reports to Congress without any regard for political implications – an admirable gesture, no doubt, if we lived in a world of noble and principled politicians. But, not surprisingly, the very same stance that won him admirers in Congress made it easy for his enemies to portray him as a hack. His candid reports ended up being twisted both by Republican congressmen – Darrell Issa on several occasions exploited these reports to issue press releases predictably critical of the Obama administration – and Treasury officials – who simply stopped returning his phone calls – to serve their own agenda.
Still, Barofsky deserves credit for doing his best under the circumstances. Perhaps then, he could be more forgiving of others trying to do the same. For instance, Barofsky is highly critical of the way the Treasury has handled mortgage modifications. But all mortgage modification plans that have been rolled out in the past years (Hamp, Harp) required active participation of mortgage servicers who, as Barofsky acknowledged himself on several occasions, lacked the necessary infrastructure to modify loans to everyone's satisfaction. If it all comes down to servicers who are ill equipped or unable to do the job, then is there any way to circumvent the servicers and still reduce the principal on millions of mortgages? Perhaps Treasury Secretary Timothy Geithner made a mistake by throwing money at mortgage servicers in the hope that they would do their job, but the alternative would be doing nothing at all or writing Treasury checks directly to homeowners. The former would be political suicide; the latter would be dead on arrival in Congress.
What eventually led Barofsky to resign as SIGTARP was not the corrupt ways of Washington, but that those ways started to infect him and turn him into a person he despises. At one point, he found himself upset about some procedural snub he received from Issa, a move his old self would dismiss, but that ultimately rubbed him the wrong way. It's not the dismissive attitude of Republican Congressman that disgusted Barofsky, but his own reaction to it, his sudden mindfulness of the D.C. pecking order, the system that he used to ridicule. That same day he started working on his resignation letter.
As a taxpayer, I would be tolerant of the watchdog playing a little politics if it ultimately resulted in my money being spent in more responsible ways. But the game in Washington turned out to be too repulsive for Barofsky to continue as SIGTARP. The problem is, the game is practically tailor-made for Wall Street lobbyists. What are we, citizens and taxpayers, supposed to do now? If Barofsky can't represent us, then who can?
Katya Grishakova left the financial industry after spending more than a decade at various Wall Street firms. She is a member of the Alternative Banking Group within the protest movement Occupy Wall Street and a Board member of ACT NOW, a New York progressive organization.