Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street

Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street Neil Barofsky Free Press, 2012When asked "what would you do if you were made a dictator? ," the eminent Austrian economist Ludwig von Mises replied "I would resign," a response fully in keeping with his libertarian bent. We might well think that our answer would be the same if asked that question. But before resigning, a reluctant dictator-designate would do well to issue at least one edict: that every intelligent member of the society read Neil Barofsky's Bailout. If there is any one book that lucidly and engagingly tells the story of the U.S. government's response to the recent economic crisis and at the same time reveals the depths of American political and financial venality, it is Bailout.Without being a "Washington insider," Barofsky has been ideally situated to give an inside account of the massive bailout that began with the enactment of TARP (the "Troubled Asset Relief Program") in late 2008. He was named by President George W. Bush, and confirmed by the U. S. Senate, to be the "Special Inspector General of TARP" (thus, the acronym SIGTARP), and continued in that capacity under President Barack Obama. In all, he served as the inspector general from December 15, 2008 to March 31, 2011. While formally on the organization chart of the U.S. Treasury Department, Barofsky was intended to be, and was, an independent watchdog. As the book makes clear, his independence consisted of a tenacious refusal to be anyone's lapdog. Before he was appointed, he was a tough-minded prosecutor in the U.S. Attorney's office for the Southern District of New York, among other things going after the vicious narco-terrorist FARC (Revolutionary Armed Forces) cartel in Colombia before proceeding to a major accounting fraud prosecution. One would hardly have expected President Bush, a Republican, to name Barofsky the SIGTARP, since Barofsky is a Democrat and had just contributed to the 2008 Obama campaign. (It is worth noticing this, because the book is nonpartisan in its scathing criticism of both administrations' coziness with Big Money and ham-handed administration of public business.)Even without counting the billions in American "stimulus" spending and voluminous "quantitative easing" by the U. S. central bank, the "financial bailout" has indeed been massive. U.S. government commitments have amounted to an amazing $23.7 trillion dollars (although Barofsky is quick to explain that a "commitment" is different from an actual pay-out, which came to what we might call a "mere" $4.7 trillion dollars before repayments reduced the sum to $3 trillion). Certain truisms come to mind: that programs of such size almost inherently rule out careful administration; and that gigantic piles of cash (called "Whales" by those in the know) will inevitably serve as powerful magnets attracting extraordinary cupidity. (Along these lines, but citing an instance in a totally different connection, Barofsky refers to "the pervasive fraud in the Iraqi reconstruction effort.") When the monetarist economist Milton Friedman was asked what he would do to stop a depression, he joked that he would get a helicopter and simply drop cash on the society. That pretty well characterizes the response of the Bush/Obama administrations to the financial crisis. What Barofsky describes is amazing - a blunderbuss approach with little supervision or caring about supervising, and much corruption, both "legal" and illegal.For most of us, the conundrum throughout the crisis has been: "How can we possibly know all that has been going on, both in detail and in broad overview? " In short compass, Barofsky's book supplies that need. He was centrally situated to witness the events as they unfolded and to have the information we all wish we had. Moreover, his independent mentality and outspoken tenacity make him the ideal observer. A cravenly observer whose reporting was skewed by partisan bias or who would shrink from the truth out of concern for his career would produce a book of little value. …