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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.

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Think about this for a second. Congress’s approval rating is in the toilet, and the legislature is used as a scapegoat for any number of problems. The public likes the President, broadly speaking, but thinks of Congress as immensely corrupt and inept. Barofsky’s book essentially says that the public has this story backwards – it was Treasury, he argues, who was uninterested in preserving taxpayer dollars from fraud. And it was Congress, figures like Barney Frank, Darryl Issa, Richard Shelby, and others, who were the major forces behind what little accountability there was towards the banks. Even more shockingly, Barofsky notes that actors in the Bush administration, from Hank Paulson to Neel Kashkari, were more honest and reliable than those in the Obama administration. Barofsky, a self-described Democrat, found this surprising.

Ultimately, this book is about political corruption, and how it actually works in subtle forms in DC. Barofsky begins Bailout with an instructive anecdote. Sitting in a restaurant with millionaire banker turned Treasury official Herb Allison, he recounts how Allison tried to bribe him. Allison implied that if Barofsky goes softer on the administration, he’ll get a judgeship, or something along those lines. If he does not, well, Barofsky’s going to have a tough time finding post-government work, and he has a young family, so that might be something he should keep in mind. Barofsky’s colleague and deputy Kevin notes that this is a very similar operating model of the drug cartels, who offer either the “gold or the lead”. It’s more subtle and less violent in DC, but the principle is the same. In my experience, this rings true. Winning reelection is far less important than playing ball.

If there’s one problem with the book, it’s that Barofsky never follows this analogy to its logical conclusion. Treasury’s programs, he says, are inept, incompetent, wasteful, intellectually captured, etc. DOJ is afraid to prosecute big cases, unable to go after bankers, etc. Various Treasury officials were deceptive in proposing various programs or engaged in spin or outright lies. But Barofsky never comes out and says either that the Bush or Obama administration pursued policies that were corrupt, for ulterior motives that would accrue to their personal gain. He never argues that TARP itself was itself a scam, or that the lawyers at the Justice Department will personally profit from their government work protecting the banks. Allison offered him the gold or the lead, but Barofsky doesn’t explicitly draw the implications of what that means.

But this is a small criticism. Bailout is a fabulous book, and it rings true to what I saw from my small corner of Congress, and what many of you saw when following the bailouts and the policies pursued by the Bush and Obama administrations. Finally, someone who was there in a pivotal role has a book telling this story.

 

Matt Stoller is the former senior policy adviser to Rep. Alan Grayson and a fellow at the Roosevelt Institute. He blogs frequently for Naked Capitalism. He appears on the FX show "Brand X with Russel Brand." Follow him on Twitter at @matthewstoller.