Bank Bailouts in the Black, Watchdog Asks "And the Toxic Mortgages?"
The bailout programs used to prop up the nation’s banking system are now in the black. The U.S. Treasury announced this week that the investments it made in banks, beginning in 2008, to prevent the sector from folding under the weight of the financial crisis have now turned a profit.
One of Treasury’s harshest critics, TARP Special Inspector General Neil Barofsky, cast his own dark cloud over the program’s proclaimed success, even as his final day in office approached.
Barofsky reminded readers of the original intent of TARP, the intent that was put to lawmakers when they voted on the controversial $700 billion program – to buy up toxic mortgages.
“Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the [legislation] expressly directs the department to do just that,” Barofsky wrote.
But, “almost immediately,” Barofsky said, “Treasury’s plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.
He told the New York Times, “The estimates have been consistently off and Treasury has consistently changed the metric for success. In the beginning, they weren’t touting payback – they touted effectiveness. Now, they are touting payback but ignoring the moral hazard this program has created.”
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