An Investigator Presses to Uncover Bailout FACTS: Neil Barofsky

And then there is the main question which everyone on Wall Street is stonewalling: were the obligations created in mortgage origination paid off by government or insurance? To put it another way, were the homeowners already bailed out and don’t know it?

Editor’s Comment: Barofsky is like Elizabeth Warren — someone Wall Street doesn’t like, and describes reality instead of spin. He’s got subpoena power and people with guns to enforce those powers, so I expect a lot will come out of his investigations. The reason this is relevant to this Blog is that Barofsky and Warren are both digging for the same information we are seeking in the Courts — and which so far, many Judges don’t want to hear about.

  1. Who received bailout grants, purchases, loans or credits?
  2. Why did they receive that money? I don’t mean the question of policy here I mean to ask what was received in exchange for the bailout?
  3. Did taxpayer money buy mortgage-backed securities, yes or no?
  4. Did taxpayer money buy mortgage notes, yes or no?
  5. Was taxpayer money used directly or indirectly or both to buy something from someone? My question here is whether the money was simply a loan, or was it used to finance payoffs on insurance contracts or was it used to pay off mortgage backed security holders and if so how and through what conduits? Maiden Lane entities and thirty others just like it?
  6. Is the Maiden Lane shell game still in operation and if so whoa re the principals and what are they doing with our bailout money?
  7. And then there is the main question which everyone on Wall Street is stonewalling: were the obligations created in mortgage origination paid off by government or insurance? To put it another way, were the homeowners already bailed out and don’t know it?

So far, Mr. Barofsky has accused the former Treasury secretary, Henry M. Paulson Jr., of misleading the public about the health of the nation’s biggest banks during the crisis of 2008. He has been investigating the taxpayer-subsidized shotgun wedding of Merrill Lynch to Bank of America. He has named a group of bonus recipients at the American International Group who promised to return $45 million to their government-owned employer last year, then coughed up less than half of it.

“instead of negotiating from a position of strength, the New York Fed poured $85 billion of its own money into A.I.G., on hard-nosed terms that Goldman Sachs and JPMorgan Chase had planned to charge before they got cold feet. Much of the Fed’s money was gone within minutes — and so was the Fed’s leverage, or any real chance of getting the money back.”

January 26, 2010 New York Times

An Investigator Presses to Uncover Bailout Abuse

Neil M. Barofsky is not a household name like some special investigators of the past — Kenneth Starr during the Clinton administration or Archibald Cox in the Watergate years.

But increasingly, Mr. Barofsky is setting off fireworks on Capitol Hill as he quietly and methodically pieces together the most complete historical record yet of the financial bailout. His reports are careful but not cautious, showing a willingness to stand up to some of the most powerful people and institutions in Washington or on Wall Street.

“Neil is not afraid to just follow things where they lead,” said Anthony S. Barkow, a friend and fellow former prosecutor in the United States attorney’s office for the Southern District of New York. “He is undeterred by having powerful people angry at him for doing what he does.”

So far, Mr. Barofsky has accused the former Treasury secretary, Henry M. Paulson Jr., of misleading the public about the health of the nation’s biggest banks during the crisis of 2008. He has been investigating the taxpayer-subsidized shotgun wedding of Merrill Lynch to Bank of America. He has named a group of bonus recipients at the American International Group who promised to return $45 million to their government-owned employer last year, then coughed up less than half of it.

On Wednesday, Mr. Barofsky will be one of several top officials to answer questions before a Congressional panel on how the government handled the bailout of A.I.G. Mr. Barofsky will cite contradictions in the Treasury’s public statements about the bailout, according to an excerpt from his written testimony obtained by The New York Times.

The Treasury issued a statement this month that “taxpayers will be made whole” on certain investments in A.I.G., but its own analysis has estimated that the Treasury will lose $30 billion on the same investments, according to the prepared testimony.

Mr. Barofsky will also announce that he has opened an investigation into possible misconduct in the New York Fed’s efforts to limit A.I.G.’s disclosures about the bailout in filings with the Securities and Exchange Commission.

If there turns out to be a crime in any aspect of the bailout, Mr. Barofsky is not the one who will lay it out before a jury — he does not have the mandate.

“He’s more like the F.B.I. than the Department of Justice,” said Mr. Barkow, the former prosecutor. “He can’t control when his cases are going to be brought.”

Officially, he is not categorized as a special prosecutor; his job is a narrower one, auditing the disbursement of money under the Troubled Asset Relief Program. He goes by the ungainly title of special inspector general for the TARP, or Sigtarp.

But in an interview in his new quarters in Washington — a building on L Street, a vast improvement over the mildewed Treasury basement where he started out — Mr. Barofsky likened his job to “building a case for a trial.”

“You want to pursue every lead, every bit of evidence, everything to persuade the jury,” he said.

In this case the jury is the public, who suspect they have poured trillions of dollars down a black hole.

“Taxpayers really want to know,” Mr. Barofsky said. “I think too often in Washington, people underestimate how interested the public is.”

There are, in fact, several other panels charged with reviewing and monitoring the bailout. But Mr. Barofsky is the only one backed by federal agents who carry guns and badges and, if necessary, can break the locks off file cabinets.

Those added powers, and an attitude honed during eight years of fighting white-collar criminals and Colombian drug lords as an assistant United States attorney — he still has the knife from a foiled attempt on his life in a field outside Bogota — are propelling Mr. Barofsky over barriers that have slowed the others.

Not long after his nomination was confirmed at the end of 2008, he beat back an effort by the Treasury to have his office put under supervision of the secretary.

He also forced the Treasury to let him obtain a statement, under oath, from every recipient bank about how it used the taxpayers’ money.

“We were told we were playing politics,” he said of that battle over several months with the Treasury, which said the recipients should be required to disclose only their lending activity. “That it was a meaningless exercise. At least three times, we were told we should consider it closed.”

Mr. Barofsky’s report on the uses of government money found that some institutions had applied it to projects that directly contradicted the Congressional intent for the program.

The public seems pleased that someone is standing up to the banks and the officials who bailed them out. A Web site that Mr. Barofsky set up for tips has received about 30 million hits, he said. And Congress expanded his powers last year.

He made his most recent waves in November, when he issued the results of an eight-month audit of how tens of billions of dollars, sent by the government to a teetering A.I.G., wound up at a group of big banks in the United States and Europe.

The audit was requested by Representative Elijah Cummings, a Democrat of Maryland, who rounded up 26 other Democrats to sign his letter in March 2009. But by the time it was finished, it was pounced on by a no-holds-barred Republican, Darrell Issa of California, who called it “extremely useful in laying the foundation for our investigation.”

The report describes how the Federal Reserve Bank of New York sealed its own fate in September 2008, when it tried unsuccessfully to put together a private bank loan for A.I.G., then in the throes of a terrifying worldwide run on the bank.

“This is the moment when the greatest amount of leverage to negotiate exists,” said Mr. Barofsky.

But instead of negotiating from a position of strength, the New York Fed poured $85 billion of its own money into A.I.G., on hard-nosed terms that Goldman Sachs and JPMorgan Chase had planned to charge before they got cold feet. Much of the Fed’s money was gone within minutes — and so was the Fed’s leverage, or any real chance of getting the money back.

“I don’t want to play Monday morning quarterback, but there are other things that could have happened,” Mr. Barofsky said. He said the Fed could have achieved better results if it had behaved more like a regulator and less like a creditor.

Mr. Issa, the ranking Republican on the House Oversight Committee, recently asked to see the original documents that Mr. Barofsky had collected while conducting that audit. Mr. Barofsky politely declined, saying that to gain the Fed’s cooperation, he had promised not to give out its documents without its permission.

Left empty-handed, Mr. Issa suddenly found himself on rare common ground with the Oversight Committee’s Democratic chairman, Edolphus Towns of New York. Mr. Towns took Mr. Issa’s cue and subpoenaed the Fed documents, and also called the Wednesday hearing, where the Treasury secretary, Timothy Geithner, will answer questions, as will Mr. Barofsky, among others. Mr. Paulson may also appear but has not confirmed.

Congressional staff members have been circulating e-mail messages showing close interactions between A.I.G. and the New York Fed in deciding how much information should be made public.

Mr. Barofsky said that as a lifelong Democrat, he was caught off-guard by his selection by President George W. Bush. He was three years into a complicated criminal case, and moving to Washington would disrupt his plans for a January wedding and honeymoon in Costa Rica.

His boss, the United States attorney, persuaded him with what he called “the God-and-country speech,” Mr. Barofsky said. The honeymoon was postponed until May.

When he arrived in Washington, he said he was shocked to find how much money was flying out the door, with so few controls.

In one conference call, he said, he asked what safeguards would be built into a new program to help investors buy banks’ impaired assets.

“They said, ‘Rating agencies and investor due diligence,’ and my jaw just dropped,” he said. “They said, ‘Yes, the ratings agencies will not be embarrassed again.’ I can’t tell you how often I heard the phrase, ‘reputational risk.’ ‘Oh, the banks wouldn’t do that.’ This is trying to shame the shameless.”

The Fed and Treasury have grown more receptive to his ideas, he said. And his office has also grown. It now has a branch in New York, and there are plans for two more in California.

  1. “We’re following the TARP crimes,” he said.

11 Responses

  1. zurenarrh,

    I would say its bcuz I’ve worked in the banking industry as a 3rd party bill collector for both Chase and Citi…Until the trustees come to find out lied about what their contracts held with Chase. After 2.5 yrs of being told I had the right to sell mortgages for Chase I found out they lied…I’ve found out quite a bit…

    Basically, also I figured out that the Sr. Dist Court Bk Judge is on the take as well..In other words he works with the banks to cheat homeowners out of an unbiased and impartial judge…While they’ve attempted to DENY THIS evidence other files show I’m not the only one who has questioned this in the past…

    I believe the Judges that recused want no part of their CRIMINAL RING….I’ve done nothing but tell the TRUTH…Which is yes I created a debt. Yes its due…However, when fraud was created at the onset , and my own atty has done everything to sell me down a river without a paddle what would you like for me to do today? Go POSTAL? That’s not an ANSWER FOR ME….I have a way to get my bills paid…And a whole lot of others bills paid…To me I shouldn’t be DENIED an OPPORTUNITY TO SUCCEED IN LIFE BECAUSE OF THEIR CORRUPTION…

    If by chance the bankers I’m working with ARE NOT HONEST OR REAL than by all MEANS PLEASE MAKE SURE YOU SUE and Jail THEM….

    I’m all about HONEST BANKING….for people to lie and lie and lie the way I’ve seen its no wonder the meltdown has happened….But the CORRUPTION has to be gotten OUT! So legit people have an honest chance at promoting HONEST BANKING and can make a buck instead of just a select few corrupt bankers.

    But its not like I can verify their capability bcuz you can’t reach an honest banker or atty to save your LIFE! has the attys that are down as the board of directors for (NARS@ THE SEC OF STATE OF MO)the collection agency that continually encouraged me to break the law in the name of their clients….Who happen to be Chase and Citi…Although I will never stick up for Citi…Their notorious for LYING… FOR A WHILE THE Banking Cartel has owned(Corrupt attys, US Attys, Judges own our Justice Dept) our JUSTICE DEPT…There are few UNBIASED AND IMPARTIAL Judges left…

    Regardless, of the TRUTH staring the DOJ in the face. MOST I say MOST won’t do anything to STICK UP TO THESE OVER PAID LIARS…There are a few but none of them I’ve found in my state…Every atty out of state has refused PRO HAC VICE HELP…

    I’M Angry bcuz for every American that I know that doesn’t know what I know needs to hear this! We’re not even given the benefit of a doubt to perform at such banking levels as most of them… It’s not rocket science to understand proper banking laws…They like NEIL has repeatedly said are STEALING HOMES….

    If I ever get any HELP after 6 yrs of trying to get help for every American to avoid such issues I may just have a heart attack…God Forbid!

    I know I’m only one and most don’t know me…But when you work first hand frontline in the most devastating meltdown and tried to help prevent it what would you like me to do today? lay down and shut up? Well I’m ALIVE and Kicking! See I don’t think SILENCE IS GOLDEN….I WANT ANSWERS!

    They are covering for Attys and JUDGES! Obstruction of Justice is what most are facing in the courts today. They know I’ve caught them…BAD … I’ve had things happen not totally within my control. Its not within my control to demand a BANK CONTRACT to verify if my employer is telling me the TRUTH when I accept employment w/them!

    I could never expect like every other AMERICAN if you have someone capable of doing good commerce that people would attempt to be so corrupt to make legit business not happen. Or that I have never be told what amount is enough to spend to get someone to do proper banking business? As I said $150,000 to 50m per month wasn’t enough.

    For the thousands of people that have no way out I’ve been fighting for a way out! I’ve worked hard my whole life like them to be a sucess. Let me tell you something….I am a person, an American, I am a SUCCESS w or w/o a (corporate) job ….I don’t appreciate being lied to about having the right to sell mortgage notes for one of the largest banks in the world for 2.5 yrs…

    I don’t appreciate not being given the benefit of a doubt to Tell The Truth! I don’t appreciate finding biased and impartial judges in my courts. This damages not only me but anyone walking into that court thinking their atty or judge has their best interests in getting matters resolved amicably. Their massively trying to protect their corrupt courts. I understand in recusal if a judge is involved that a judge is to recuse.

    In my case I’ve been Denied a(TRO) chance to Stand Up For Our Rights! That dammit if your told something you have to be able to believe something! (BLIND TRUST) To have it be a lie at this magnitude is obnoxious! They (THE DEPT OF JUSTICE) refuse to HELP! or else everything I’ve been trying to say for 6 yrs would of been heard already…But NO you know why not? CORRUPTION GREED…VS…HONESTY, TRUTH, AND WEALTH FOR ALL…The MEDIA…YES CNN…ANY NEWS MEDIA OUTLET has REFUSED TO HELP….For the millions w/o help I’m trying to help! Forget attys…Their lying to suit their own needs…Your retainer and their lies…Want answers to your questions? Real Ones…Ask an ATTY…BEWARE most are CORRUPT! Talk about wolves in sheeps clothing.

    Most Americans have been had for ever believing in doing the RIGHT THING…This is a CIVIL WAR WITHIN the Courts…In our AMERICAN CIVIL SYSTEM…I may not be college educated…But I did attempt to PROTECT BOTH SIDES….

    THE BANK who wants to be paid…And the HOMEOWNER IN MOST cases doing everything they can to KEEP A HOME…Something EVERY AMERICAN cares about more than anything! This story is happening daily to everyone..

    To require more than one area of education to succeed is obnoxious…Now we’re suppose to be dually educated. Some People have a hard time getting any type of degree….Everyone has a different degree of knowledge…For everyone to have to be made to be an atty or paralegal to make sure your not ROBBED BLIND IS ABSURD!!!

    These are the points that earned me my recusals.I DIDN’T MOTION TO RECUSE…I MOTIONED TO VACATE THE JUDGES DENIAL OF MY TRO to keep my home and the reasons why…TO think…I’m a bill collector trying to make a buck to PAY MY BILLS…Have had other bankers willing to help me do this…Yet all I’ve found is corruption! Ugh! Anyone know what it takes yet? Honesty obviously somehow has gotten me NO WHERE..Just FRIVOLOUS PLEADINGS I’M TOLD…then the SUA PONTE RECUSALS…GUESS I WOULD OF BEEN DISBARRED IF I WAS AN ATTY…Can you imagine being disbarred for telling the TRUTH? My atty has actually told me he’s trying to protect the court…REALLY? If I’m so wrong did they recuse twice?

    Now I have reviewed rulings by one of the judges who recused…She seems to attempt to be fair in her rulings in St. Louis from what I’ve read…Her name is Carol Jackson. But to be Denied a chance to do the right thing…Make money to pay my bills and keep my home p me off…

    My bankers could of had my bills paid in 10 days or less…I at max w/home and everything owed less than $200,000 some of my endeavors would of given me a min of $10,000 to $100,000- $500,000 per month besides other projects that could raise $50m cash or more to help in a MAJOR WAY. I couldn’t spend that kind of cash on my own…

    God forbid! My family is YOUR FAMILY AS WELL is the way I see it! Everyone should be given the same OPPORTUNITY in LIFE…To be Denied that should be or is against the LAW…It shouldn’t only be that only certain people get TO DO PROPER BANKING BUSINESS… If you want more info you can contact me…thru here or my blogpage…

  2. topgun,
    I am interested in how you got recusals. More specifically, how did you get the info that led to the recusals? In the meantime, I’ll check out since that seems like it might contain some of the info you’re talking about…

  3. Abby,

    Libra99 is spot on. Now I’m not a gun toting person myself. However, know there are certain areas of this great country you should never go without one. This is sad!

    However, the Judges are ON THE TAKE. My record can be reviewed to show if you know what the hell is really going on they will do everything they can to destroy you. They will remove pages of your court complaints and outright lie about you! I figured it out though recently folks why I got the RECUSALS…

    THE COLLECTION AGENCY NARS has two of the TOP FORECLOSURE TRUSTEES down as their BOARD OF DIRECTORS. They are over god knows how many law firms as far as mgmt goes. You can usually find them easily at Schapiro and Dave Kreisman. Figured out they are a wholly owned subsidary of 1st American Title. They did create the CRADLE TO GRAVE HANDLING of Mortgage Notes.


    I’M A HARD CORE HONEST AMERICAN…I believe people should be treated fairly. My livelihood has been stolen over corrupt individuals and I don’t care who knows!


    This is whats happening! They don’t want the HOMEOWNERS TELLING THE TRUTH…My atty has tried to hide EVERYTHING…Now the ??? is has he ever really put together who I am? Two JUDGES did and they ran! Judges can lose their bench if their found biased and impartial…I found them to be…Two understood why….Now when will I be called to tell a dousy of a story about what’s really happened? It’s called OUTRIGHT THEFT!

    Bankers can’t find honest business people. What’s the use in having bankers to do business if they’ll do anything to make sure u don’t make a buck? $150,000 to 50m per month isn’t enough either…Man my mortgage was piddly…You’d think they’d be about doing legitimate business…But they have The house and senate locked by CORRUPTION….BY the way NEIL if you read this I believe Kreisman and Schapiro are REPUBLICAN…I’M neither a DEMOCRAT OR REPUBLICAN…I am an Honest American though whose one PISSED OF PROFESSIONAL…Holding a gun(shouldn’t be an answer) unfortunately to these so called BANKERS, JUDGES AND ATTYS it seems will be the only way we get help…Commit a crime their all over you. They commit one and we’re just stupid shits who know NOTHING! And REPRESENTATION? WHAT’S THAT? Attys are afraid of the JUDGES…Not me…Only if I’ve done something wrong would I be…The TRUTH is the TRUTH I’m not WRONG!

    Man I guess I should of kept track of how many times I was ENCOURAGED to BREAK THE LAW. But if they ever DID THEIR JOB AND INVESTIGATE they would of already found out what I know…And maybe of done something…But they haven’t…That’s why I said their aiding and abedding white collar criminals…Most even if we’ve tried everything to tell THE TRUTH are shut down w/o representation…Then if your atty doesn’t believe you your had as well…Well I guess we can sum it up to OBSTRUCTION OF JUSTICE…At the highest level fathomable… No one WANTS TO HELP….I’ve been to the whole nine yards…Naca and Naca, hope now, Center for Resp Lending, Legal Aid, atty after atty locally and nationally…Talk about FEAR!

    I HAVE NONE….See I’ve already lived thru two car accidents and I know God wants me here…Or else I wouldn’t be here typing now…So tell me how you would do things differently…

    Apparently paycheck stubs and transaction registers showing I collected for Chase and Citi isn’t enough…The ruining of endless lifes isn’t either..So TICK TOCK TICK TOCK….

  4. […] Two at Fed Had Doubts Over Payout by A.I.G. Posted on January 27, 2010 by livinglies January 27, 2010 New York Times see also an-investigator-presses-to-uncover-bailout-facts-neil-barofsky […]

  5. Sir
    My loan was funded by Lehman Bros series xs 2007-09. This appears to be some sort of direvative. Hpw can I find out if the diravetive was insured?
    Stan Racine Wi

  6. Abby,

    God forbid; if LE doesn’t like it, they can come arrest me. Last I heard, we still had freedom of speech in this country; or are you that damn paranoid and brainwashed ??

  7. […] This post was mentioned on Twitter by Mary Sanders, Mario. Mario said: An Investigator Presses to Uncover Bailout FACTS: Neil Barofsky …: To put it another way, were the homeowners al… […]

  8. To file a complaint related to how TARP – AIG etc., has performed in your / our world click on the following link:

  9. As long as these crooks running the GSE’s (fannie, freddie and MERS), FED and Treasury continue to collude and conspire everyone should expect tragedy as the end result.

    Countrywide+Bank of Amerikkka+Fannie+Freddie+MERS+FED+Treasury= Rico

    Collusive silence is a crime under 18 USC 4.

  10. Libra99

    I think you should temper your comment. That is NOT something to suggest.

    I am certain law enforcement reviews this blog.

  11. Most judges are like the rest of our government; corrupt. Perhaps we should have a national “bring a gun to court ” day.

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