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Why Neil Barofsky’s Book “Bailout” Matters

The former Special Inspector General for TARP gives a riveting - and highly disturbing - account of what went on behind the scenes in Washington in the wake of the 2008 financial crisis.

Neil Barofsky’s new memoir  Bailout, is not just a great read, it’s also a very important story about what happened after the financial crisis. Barofsky, who was the Special Inspector General for TARP, was in a vantage point to view the entirety of the Obama policy apparatus, from the use of TARP to pad bank balance sheets to Treasury’s PPIP program to the reorganization of the auto industry to the housing crisis. And he doesn’t disappoint, packing the story full of flashy anecdotes which give more than any book I’ve read a sense of what it’s like to be in DC in a powerful position where your goal is not to get along with the actors controlling the status quo. The book paints the atmosphere in DC’s melange of agencies, bureaucracies, and Congressional halls as a mix between the drudgery and petty bureaucracy of  Office Space and the world-cleaving tension of  Too Big to Fail. As a Congressional staffer, I worked a bit with Barofsky’s office, so I’m going to give a slightly different perspective on the book than what you might have read elsewhere. You see, what very few have picked up on, even those who liked this book, is that it’s essentially a story about the importance of Congressional oversight in reigning in corruption, and the problems of our imperial Presidency.

By way of background, it’s helpful to understand why Barofsky was even in DC and what his job actually was. As it turns out, the US government has a variety of mechanisms for preventing corruption. The one relevant to this story is the Inspector General position, which is a standard oversight “ombudsman” style operation that pretty much every government agency has. These officials are supposed to oversee their departments, writing reports about their activities and ferreting out problems and corruption. IGs tend to report their findings to Congress (usually  to the special subcommittee on oversight for each specific committee), and Congress then takes action (or not). Barofsky was the Inspector General for the Troubled Asset Relief Program, or TARP, a position created by a skeptical Congress when Treasury Secretary Hank Paulson asked for $700 billion to buy toxic assets on the balance sheet of various banks.

To put it simply, this is the book that explains that in fact, yes, your suspicions of what Treasury was up to are correct. It’s not a series of hints and parsing of statements of various high level officials, it’s a straightforward account by a watchdog who fought with Geithner via bureaucratic tricks, the press, in Congress, and in meetings with Treasury and DOJ personnel. Throughout Barofsky’s 27 months in office, members of Congress on both sides of the aisle and Neil Barofsky’s office worked together to attempt to reign in the worst of Treasury’s abuses.

The book is a memoir, and it starts just before Barofsky went to Washington as SIGTARP, recounting briefly his career in the US Attorney’s office in the Southern District of New York. The Southern District is an office with jurisdiction over Wall Street, a track record of effective high profile white collar prosecutions, and a strong bipartisan alumni network. Barofsky talks about one of his cases going after the narco-terrorist cartel in Colombia, or FARC, and how he jousted with various government agencies – the DOJ and the State Department – to push the case forward in the face of bureaucratic stubbornness. Barofsky came dangerously close to being assassinated by the cartel, as he learned later. At one point during the case, while on the Amtrak train, he noticed a man staring at his computer screen, and it turned out to be Joe Biden. Biden told him that the biggest obstacle to enforcing international narcotics laws was not corruption or traffickers, but “the United States State Department.” It’s these little nuggets that are the heart of the book. For instance, at one point, Barofsky notes that if you see the media reporting on a high profile arrest of a criminal, it’s most likely that the FBI leaked the arrest to the press, since the agency is a notorious manager of its own self-important image. Barofsky also discusses another case, of a fraudulent commodities company called Refco, which introduced him to the complexities of the modern financial system, including the repo market. Barofsky presents himself, accurately, as a straight shooter New York Southern District prosecutor, someone who dislikes DC and just wants to do his work going after bad guys.