Welcome Neil Barofsky (PBS Newshour) (Frontline) and Host David Dayen (FDL News Desk) (Salon.com)

Bailout: How I Watched Washington Rescue Wall Street While Abandoning Main Street

I believe this is former Special Inspector General of TARP Neil Barofsky’s 206th media appearance in support of Bailout. He has tirelessly criss-crossed the media landscape to tell the story of his time in Washington and offer a warning about a government captured by Wall Street. So instead of yet another review, let me tell a personal story that I think will yield some insight on the human toll of that government capture.

This is the first, and possibly the only, book about Washington where I can do the “Washington read,” aka flipping to the index and look for my name to find out what was said about me. Indeed, right below Andrew Cuomo, there I am, “Dayen, David 154-6.”

Let me tell you how that came about. Neil contacted me and asked if he could use an example from my Portrait of HAMP Failure series to illustrate the real-world consequences of the program, which all too often turned the loan modification process into a nightmare for homeowners. I gave him a number of suggestions, and he selected the story of Jeremy Fletcher, a Southern California swimming pool installer who bought a new home at the height of the bubble, right before the housing market crashed – and the market for installing pools along with it. Fletcher’s HAMP odyssey included a yearlong fight with Citi Mortgage, and just when he maneuvered to the point of getting a permanent modification, his loan was sold off to Saxon Mortgage, who then refused to honor any of his previous agreements. “It seemed like we had cornered Citi, got them to the point where they had to modify, and they just up and sold the loan,” Fletcher told me at the time.

Neil found this to be the perfect story for the book, and he agreed to use it. A few months before publication, he called me and asked me for contact information for Fletcher, to check for any developments in the story. I not only provided Neil with his email address and phone number, I tried to contact him myself. I had talked with Fletcher in the past with updates on his status (basically, he was in the same fight with Saxon Mortgage), and was curious about the current state of affairs.

And the truth is that Jeremy Fletcher could not be found. His email address was tied to his pool business, and it’s unclear whether that remains in operation. The phone number just went to voicemail. I never got back in touch with Jeremy Fletcher.

This is depressingly normal with regard to these HAMP horror stories. People have to leave their homes. They move in with family or friends, or into their cars. Their businesses end, and in some cases their marriages end. Far too many of the stories, which is to say more than zero of them, end in suicide.

This is the aftermath that results from a set of policies concerned more with banks than homeowners. The incoming Obama Administration made a series of promises around helping mitigate the worst aspects of the foreclosure crisis, and they failed on a host of levels. But it’s not enough to just say “they failed.” You have to say “Jeremy Fletcher has vanished.” When Barofsky cites Timothy Geithner famously saying that HAMP was designed to foam the runway for the banks, allowing them to spread out foreclosures and absorb the losses in a more manageable fashion, the runway was foamed with people like Jeremy Fletcher. They had their last remaining savings squeezed out of them, with hopes of permanent modifications that would allow them to afford their mortgage payments, and then the banks pulled out the rug, taking over the homes at a time convenient for them. It was textbook predatory lending, and the opposite of what the Obama team promised as one of the clear benchmarks for whether or not TARP succeeded.

Housing policy has become the great unmentionable in this Presidential election. Mitt Romney released his housing plan in a Friday night news dump on the same day he released his tax returns, which should show you the importance he places on it (as if you didn’t get it from the page and a half of vague “solutions” in the policy document). You can barely even find Obama’s housing plan on his website. The candidates visit swing states ravaged by the foreclosure crisis, places like Florida and Nevada and Ohio, and they promise people better lives and a brighter future. But they don’t dare discuss housing.

The best way to understand why is to read Bailout. In “A Connecticut Yankee in King Arthur’s Court” style (more like “A New York Prosecutor in the Potomac Swamp”), Barofsky introduces us to how Washington works, right from the first page, where Treasury official Herb Allison basically tells him to take a dive on his SIGTARP reports as a way to get ahead in DC, offering “the gold or the lead, the bullet or the bribe,” in the way Colombian drug lords intimidate those potentially harmful to their business. He explains how Wall Street thinking has infected Washington, how the change of parties is more of a formality, and how, as he writes, “the American people should lose faith in their government.” His actions as SIGTARP saved American taxpayers billions of dollars and actually put a few of the bad guys in jail, a rare feat for the financial regulatory apparatus. But ultimately, Barofsky’s story is about people like Jeremy Fletcher. And based on this book, I’d say Barofsky was the only guy in Washington who cared about Fletcher’s story.

Please welcome Neil Barofsky to the Lake.


[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions.  Please take other conversations to a previous thread. - bev]

199 Responses to “FDL Book Salon Welcomes Neil Barofsky, Bailout: How I Watched Washington Rescue Wall Street While Abandoning Main Street”

BevW September 22nd, 2012 at 1:58 pm

Neil, Welcome to the Lake.

David, Thank you for Hosting today’s Book Salon.

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PeasantParty September 22nd, 2012 at 2:02 pm

Welcome Neil!

Thanks David and Bev.

Neil Barofsky September 22nd, 2012 at 2:02 pm

Great to be here!!

Mauimom September 22nd, 2012 at 2:02 pm

Neil, welcome. It’s an honor to have you here. Your book is wonderful.

thatvisionthing September 22nd, 2012 at 2:02 pm

Hi Neil, thanks for being here and thanks for the book! Where do we go from here?

David Dayen September 22nd, 2012 at 2:02 pm

Neil, thanks for being here! First question: it seems like in your media appearances on this book, everyone dismisses the notion that TARP was supposed to increase lending by banks, that this was a central goal of the program. Yet as you indicate, Larry Summers, in his letter to secure the second tranche of TARP funds, explicitly said he would “require healthy TARP recipients to increase lending above baseline levels.” Why is this so casually dismissed by those who want to harp on how TARP “worked” because the government got its money back?

PeasantParty September 22nd, 2012 at 2:03 pm


I’ve been told by many people that Chase is one of the absolute worst in the mortgage work out schemes. Did you come across the same in your investigations?

Jim White September 22nd, 2012 at 2:04 pm

Neil, thanks so much for being here. But even more importantly, thank you for standing up for what is right.

grayslady September 22nd, 2012 at 2:05 pm

Neil, thank you so much for your public service. I, for one, am very grateful you were in D.C. looking after our interests.
Great book, however, I was confused on the structuring of the AIG bailout and the subsequent accounting. A chart showing what went where would have been helpful. Would you consider starting a blog that could go into more specifics on some of these issues?

Neil Barofsky September 22nd, 2012 at 2:06 pm

It’s a pretty simple and tried and true Washington approach. If you set a goal, and then fail to meet the goal, just change the goal. Rather than admit the failure of the entire justification for putting taxpayers into the banks, they talk about the “profits” the taxpayer supposedly made on the bailouts, and talk about the banks roaring return to profits. So administration officials advance this ploy, and those in the media who are captured/dependent on their government sources for “scoops” repeat the lie.

emptywheel September 22nd, 2012 at 2:06 pm


Welcome to FDL.

I was surprised when reading this that some of the cases for which DOJ claimed credit when they pretended bankers live by the same laws as the rest of us was started by you guys.

How many cases like that were there?

Mauimom September 22nd, 2012 at 2:07 pm
In response to David Dayen @ 6

I’d go back even further and ask why there’s so little focus on the original “intent” of TARP — getting the “toxic assets” into Treasury’s hands so it could modify loans — and the complete abandonment of that end.

Plus the resulting fury of Congress-persons when they found out what Paulson was really doing with the money.

And, as an aside, where’s that fury now?

Neil Barofsky September 22nd, 2012 at 2:07 pm
In response to PeasantParty @ 7

It was hard to rank. One of the striking things was how consistent the complaints that we received were despite the servicer. They all had the same issues, they all cut the same corners, and all were responding to the same incentives, which often made it more profitable to throw the homeowner on the foreclosure scrap heap than to put them through with a permanent modification.

David Dayen September 22nd, 2012 at 2:08 pm
In response to Neil Barofsky @ 10

Thanks. A reminder that it works best if you reply to the questions by clicking the “reply” link under the specific question. That helps people see the thread and see their question being answered.

Neil Barofsky September 22nd, 2012 at 2:09 pm
In response to emptywheel @ 11

I’m not sure. But DOJ always claimed credit for our cases, and to be fair, they were the ones that ultimately prosecuted them once we gathered the evidence. What was really hilarious, though, was when the FBI started leaking to the Post that we weren’t “really” driving the Farkas case (the only major CEO to go to jail out of the crisis), when we found it, pushed it, and were responsible for it. But that’s DC!

rapier September 22nd, 2012 at 2:10 pm

darn, missed it

Neil Barofsky September 22nd, 2012 at 2:10 pm
In response to Jim White @ 8

Thanks, Jim, much appreciated!

Mauimom September 22nd, 2012 at 2:10 pm
In response to Neil Barofsky @ 10

Your tales of the “ways of Washington” — e.g., re your nomination and confirmation — would make a whole separate interesting tale.

I’m a former Congressional staffer, and I think it’s important that the general public have a better picture of the “inside workings” of Congress and the Executive Branch. It’s not “The West Wing”!!!!!

grayslady September 22nd, 2012 at 2:10 pm

By the way, the EPA just reached a large settlement with Scotts Miracle-Gro. As part of the settlement, Scotts must spend over $2 million on ecological restoration, and the EPA spelled out very specific requirements for showing how the money is being spent, including having Scotts submit receipts. Just shows that tracking can be done if the agency puts some muscle behind its programs.

Jim White September 22nd, 2012 at 2:11 pm

Neil, I’m glad David highlighted the Herb Allison vignette because it describes so many problems in Washington all at once. I’m curious, though. The atmosphere you described for the Southern District of New York US Attorney’s Office while you were there sounds just terrific, so it would seem at first thought that you could have refused Allison’s suggestion, stood up for what was right, as you did, and then moved back to DOJ.

Sadly, though, DOJ now is a central part of the culture of impunity that you were trying to fight. At what point did it occur to you that DOJ is now nothing like your fond memories of it, and how painful was that realization?

rapier September 22nd, 2012 at 2:12 pm

oh still here
Neil, the biggest story I think is the GSEs. In that the bailout of the GSE MBS investors is going to cost taxpayers at lest $500billion.
TARP was not involved in that correct?

Can you address this

BevW September 22nd, 2012 at 2:12 pm

A question from one of our readers (Masaccio, who is not here today)

I appreciate your ideal of public service as an end in itself. So what happens to people who go into it with that attitude when their term runs out? Do you think that doing good work will end well for people besides yourself? Or do you think maybe Herb Allison was right that you could be poisoning your future prospects?

Neil Barofsky September 22nd, 2012 at 2:12 pm
In response to grayslady @ 9

In the SIGTARP reports we always tried to untangle the mess that Treasury often intentionally created by mixing together the various AIG bailouts. I am guessing that they have continued to do so, but if you take a look at the October 2010 and January 2011 reports, I think we did a pretty good job.

As to a blog, I’m thinking about it, but the time….oh the time…

David Dayen September 22nd, 2012 at 2:12 pm

One thing that was frustrating in the book was your work on PPIP, trying to avert the terrible application of this policy. Eventually Treasury didn’t go with their initial design on it, clearly because of the questions raised not by you but by virtually everyone in the space including investors, and yet this gets seen in some cockeyed way as an example of your over-reaction. The Cassandra, then, is discredited for successfully preventing the danger that they warned about. It just seems difficult to get around this without explaining the deception in full.

More of a comment, but would be interested in your thoughts.

chicagogal September 22nd, 2012 at 2:13 pm

Let me add my thanks for writing this book! After following the foreclosure crisis closely over the last couple of years due to my own experiences, it confirmed a lot of what I had been learning – but more importantly, brought forth the vague feelings I’d had since early 2008 about things not being quite right with our government. Your book should be required reading (with daily and weekly tests!) for everyone in Washington, and really in all of the U.S. as well!

PeasantParty September 22nd, 2012 at 2:13 pm


I am a Real Estate Paralegal and recording agent. I haven’t had the opportunity to read your book, but could you speak to the property records in Country Registrar of Deeds? I know that in a lot of cases my updates have run into both Grantee and Grantor being a banking entity at times. That is so frustrating.

Neil Barofsky September 22nd, 2012 at 2:13 pm
In response to David Dayen @ 14

Got it, am I doing it right now?

David Dayen September 22nd, 2012 at 2:14 pm
In response to Neil Barofsky @ 23

If you desire seeing your wife and kids for extended periods of time, I would recommend not blogging! :)

David Dayen September 22nd, 2012 at 2:14 pm
In response to Neil Barofsky @ 27

yes thanks

cs100 September 22nd, 2012 at 2:15 pm

Neil great book…If Geithner and the treasury dept think the hamp program is to “foam the runway” and make it easier for banks to deal with foreclosures..dont they understand how one sided that is and simply trying to sweep things under the rug is going to wreck the middle class as well as peoples belief in what a government is supposed to do and protect its citizens?

Neil Barofsky September 22nd, 2012 at 2:15 pm
In response to Jim White @ 20

It’s important to remember that DOJ is not a monolith. There is Main Justice, based in DC, and then 65 semi-autonomous US Atty’s Office. As I discuss in Chapter 1 when talking about the FARC case, I knew what a cesspool Main Justice could be, so went it with my eyes wide open. But there are still good prosecutors out there!

grayslady September 22nd, 2012 at 2:15 pm

Neil, in your book you mentioned two west coast bankers who defrauded TARP for over $300 million. Were they ever prosecuted?

emptywheel September 22nd, 2012 at 2:16 pm


Someone who had a role in the SIGAR was talking to me recently about these special IGs–and it’s true (and you briefly mention) that they’re structurally similar.

Two questions about that: remind us when the expiration for SIGTARP is?

Also, is there a case to be made for these temporary SIGs because they avoid some of the institutional capture of other DC institutions? Or would that diminish over time as MOCs and Presidents figure all that out?

Neil Barofsky September 22nd, 2012 at 2:17 pm
In response to rapier @ 21

RIght. That was a completely different bill that was passed in July 2008 after Hank Paulson asked for his “bazooka.” Although TARP was not supposed to go to the GSE’s, that is what Treasury offered DeMarco recently.

rapier September 22nd, 2012 at 2:17 pm

Neil, as you have proven yourself not to be a Party Man or a Company Man or Institutional Man, but your own man, will you portray your professional prospects?

David Dayen September 22nd, 2012 at 2:18 pm
In response to Neil Barofsky @ 31

Actually, it would be interesting to know what you think of SDNY’s conduct in the post-crisis years since you left the office. Preet Bharara has been criticized for his focus on insider trading cases rather than more wide-reaching crimes specifically applicable to the crisis itself. Maybe I’m stepping into an area that you’re reluctant to discussed by virtue of omerta or something, but what are your thoughts on the SDNY’s performance?

Peterr September 22nd, 2012 at 2:18 pm

Neil, kudos on a great book, though I wish it had a happier ending.

Among the things I found fascinating were your descriptions of the way(s) in which IGs function. Some are clearly lapdogs, while others appear to try to provide oversight in the way they were set up to do.

One name I was surprised NOT to find in your book was Sheila Bair, the FDIC head at the time who (from my perspective) had a similar relationship with Tim Geithner. Back in April 2010, a joint Treasury/FDIC IG report on the Washington Mutual mess came out, and the following July, a Memorandum of Understanding was issued that gave the FDIC the power to investigate large banks, regardless of who their primary federal regulator was. This was a huge victory for the FDIC, in my book, and a slap in the face to Geithner and other so-called regulators at the Fed, OTS, and OCC.

Any thoughts on Sheila Bair?

Neil Barofsky September 22nd, 2012 at 2:18 pm
In response to BevW @ 22

Well, Allison was definitely right with respect to the types of jobs that he assume I wanted. I probably do not have much of a future on Wall Street, but that wasn’t really in my area of interest. I do worry that I have foiled my future chances to return to public service, but as time passes, anything is possible.

Neil Barofsky September 22nd, 2012 at 2:22 pm
In response to David Dayen @ 24

Yes, one of the annoying critiques pushed out by Treasury and repeated by journalists on CNBC and the NY Times was to take a line in the book about our warnings about what would happen if Treasury went forward with PPIP in the way proposed it would set up “catastrophic losses” (which of course didn’t happen because we helped kill that proposal) and pretend that I was saying that about TARP overall, and then declaring me a Cassandra for issuing an empty warning. Kind of sad that was the best that they could come up with in attacking the book, actually.

Jim White September 22nd, 2012 at 2:22 pm

As you forcefully point out in the book, the worst of the practices in the financial industry that caused the 2008 crash have not been changed. Do you think that there’s any chance that the level of detail you have provided in your work and your book will help provide at least some improvement in what takes place the next time the taxpayers have to rescue Wall Street? Assuming DC won’t have the courage to just let the worst abusers like Goldman Sachs and JPMC go belly up, what specific things can we “agitators” push for to make things go a bit better?

rapier September 22nd, 2012 at 2:22 pm

I have not read the book but it seems you were treated within Treasury with contempt. Was this made apparent like with Elizibeth Warren in a sub basesment office. Did it extend to the personal level?

Neil Barofsky September 22nd, 2012 at 2:22 pm
In response to chicagogal @ 25

Thank you, you are very kind

Mauimom September 22nd, 2012 at 2:23 pm

Neil, at some point in this discussion the question will come up, so I’ll pose it: what do we do now?

Most of us have read your book — or will — and have followed David’s excellent writings. We read Naked Capitalism, follow Krugman, Steglitz and Galbraith. We know what’s wrong, and, even if we didn’t before, we’ve now got a pretty good idea of how we got there.

BUT: in the past, it’s been “us against the Bad Guys,” and the Bad Guys were criminals and/or Republicans. But here we are now, and the Bad Guys are the very person we voted for in 2008, the people he appointed to positions of power, and those who fund him.

Where do we go? Where are our heroes? Who will speak up and tell the truth? How do we inspire folks to action, and what action should that be?

Neil Barofsky September 22nd, 2012 at 2:25 pm
In response to cs100 @ 30

You can’t overstate the lack of empathy that the Treasury officials I deal with had for the victims of foreclosure abuse. It just wasn’t part of their worlds, and if they had there way, there never would have been a mortgage modification plan. When HAMP was launched, they were still panicked about the banks toppling over, which was their primary (and often only) concern, and they built a program to deal with that, not struggling homeowners.

DWBartoo September 22nd, 2012 at 2:25 pm

Thank you for joining us this evening, Neil.

And thank you, David, for hosting.

Neil, it seems that the rule of law is no longer in meaningful force, which must, in not too long a time, come to have profoundly negative consequences for civil society.

The Agencies charged with oversight, with enforcement, appear to have all become conveniently impotent.

As well, the political class which permitted, made possible, and allowed what occurred, the executive and the and congressional “branches”, of BOTH legacy parties, at their “turns” in “power”, and not leaving out the judiciary, are quite happy with the rule of money, with the Divine Right of Money.

Frankly, we are facing much more than simply an economic “problem”, we are teetering on the verge of catastrophe in relation to many things, the environment, the wars, the inability to provide for our own needs and in that “providing” we have “lost” worthwhile endeavor for the people, the means of making a living, while a few are permitted to make a killing, even without using drones …

Unfortunately, most of the people, even those who grasp some of what is occurring, are not able to imagine the consequences, if things continue as they are … even the evident “belief” that money is all that matters.

And, even if the people DO understand, their “means” of doing much of anything about the power and money structure seem very limited indeed.

Have you any thoughts you might wish to share regarding these points, or concerns which I have raised? I thank you, in advance, for any ideas which you might be willing to articulate.


Neil Barofsky September 22nd, 2012 at 2:25 pm
In response to grayslady @ 32


David Dayen September 22nd, 2012 at 2:25 pm
In response to Neil Barofsky @ 39

One thing implicit in that is a media critique. How do you view the media now after their reaction to the book and how it varies from the formal narrative that has been put forward through a very deliberate and sustained public relations campaign by Treasury?

You write in the book about your use of the media as SIGTARP. How do you see those techniques being used against you?

bigbrother September 22nd, 2012 at 2:26 pm
In response to Neil Barofsky @ 38

The devastation and suffering the housing bubble has not been assessed. I see the whole construction industry trying to retrain themselves 5 years later. I see household living in the streets. Lucky ones have campers or other vehicles. George Bush should be charged with high treason. They called Schneiderman off and busted Spitzer for coming to close the hive. We have crime syndicate going on still.

Neil Barofsky September 22nd, 2012 at 2:28 pm
In response to emptywheel @ 33

SIGTARP exists as long as there are still outstanding “Troubled Assets.” With the extension of HAMP, that means at least until 2018, although it should be scaled down significantly by then.

I think SIGs are a great idea for big complex programs, but overtime, there is always the danger of capture there too. It depends so much on the leadership and what the senior people are trying to get out of the job. If they just want a permanent IG job, they might not be any different.

rapier September 22nd, 2012 at 2:28 pm

Neil, can you imagine who might take the Secretary chair. To say the least Geithner was perfect. He knows where all the bodies are buried. Isn’t it true he has limited all information into a very tiny circle of insiders?

Neil Barofsky September 22nd, 2012 at 2:29 pm
In response to rapier @ 35

No idea. Teaching at NYU Law for now and loving it, and have to figure all of that out.

Mauimom September 22nd, 2012 at 2:29 pm

I’m old enough to recall the “savings and loan crisis.” What happened then to the “bad guys” is light years away of what’s happening now — and our crisis, plus the criminality that caused it, are so much larger.

Neil Barofsky September 22nd, 2012 at 2:31 pm
In response to David Dayen @ 36

They’ve done an amazing job on the insider trading cases, and I think there is a tendency to minimize the importance of them. As to the broader cases, I have some very long and detailed opinions, but I’ve just been told by the publisher to start thinking about a foreword for the paperback version, so I might put them there!

PeasantParty September 22nd, 2012 at 2:31 pm


What do the banks want with all these properties? Is it because they want to be paid for the same home 14 times via the public tax payers, or is there something more sinister behind it?

I think a lot about the Land Wars in Paraquay and the Canadian Tar Sands pipeline land deals that went down.

bigbrother September 22nd, 2012 at 2:31 pm
In response to Mauimom @ 52

Bill Black prosecuted them. I lost my house. Still seeking for the system to change.

Neil Barofsky September 22nd, 2012 at 2:33 pm
In response to Peterr @ 37

I am really looking forward to her book, but I think that she did some solid work over at the FDIC, particularly by refusing to go along with Geithner’s insane PPIP program. She has correctly advanced the argument to slim down the TBTF banks, I think that we part ways, however, on the likelihood that Dodd-Frank could work to do that. But we’ll see what she says in the book!

Mauimom September 22nd, 2012 at 2:33 pm
In response to bigbrother @ 55

Oh yeah, I know. I’m longing for a return of Bill Black or his equal. Just contrasting the “action” then and the acquiescence/indifference to criminality now.

David Dayen September 22nd, 2012 at 2:34 pm
In response to PeasantParty @ 54

It’s part of my next question, but banks are financing deals with hedge funds to buy up the properties. They’re also giving strong consideration to facilitating deals to securitize the rental revenue from these hedge-fund purchased properties.

There are also the incentives to foreclose inherent in the broken loan servicing model. They get paid back first in the event of a foreclosure, and they can add on fees upon fees.

Peterr September 22nd, 2012 at 2:35 pm

Part of Geithner’s antipathy toward you and Elizabeth Warren (among others) is clearly about turf battles and control, but there are times when it seems to me he is more nervous about his old days as head of the Fed in New York and the absence of any regulatory work prior to the failures of Bear Stearns and Lehmann Brothers. To what extent do you think Tim Geithner is/was worried about being asked about (or, God forbid, held accountable for) his actions while head of the FRBNY prior to becoming secretary of the Treasury?

Neil Barofsky September 22nd, 2012 at 2:36 pm
In response to Jim White @ 40

I do hope that the reforms we need (breaking up the banks by size caps, modified Glass Steagall, much higher capital requirements) happen first, but I am not optimistic. Next crisis comes, we’ll bail them out because we’ll have to if they are not busted up first, my hope in writing this book is that AFTER that bailout we finally come to our senses and smash them into little pieces.

seabos84 September 22nd, 2012 at 2:36 pm

After checking off the Dem POTUS box for 8 elections, this 52 year old is PROUND to say I’m soooooooooo done voting for these f’king sell out scum. Watching 0bummer & the dem convention was like watching the re-puke convention — lie after lie.

I’ve done my part to validate sell outs by accepting their Lessor Of Two Evil fear driven marketing, and voting for them … and, I’m done.

what is REALLY clever about their crap programs is that the appx. 24.5 million households over 100k a year of money income can kind of access the programs, a bit … well, except they don’t need the programs.

when you’re 1 of the appx. 65.6 million households living on under 50k a year in money income you’re f’d. (table HINC-01, census)

and all kinds of people from those 100k hoods are running around trumpeting the phake ass accomplishments, cuz if we don’t vote sell out we’ll get a bonafide aristocrat butt kisser who is at least honest enough to just lie to us so we can all be outsourced … puke.

thanks for your record.


PeasantParty September 22nd, 2012 at 2:37 pm
In response to David Dayen @ 58


Thanks. Ask your question as you can word things much better than I.

Suzanne September 22nd, 2012 at 2:37 pm

welcome to fdl neil – thank you for writing this book. please write more — your book was an easy pleasurable read about complex subjects. i love love love the beer pitcher/mugs explanation for the CDO’s and tranches.

for those who have not gotten this book, whatcha waiting for — go buy it!

Neil Barofsky September 22nd, 2012 at 2:37 pm
In response to rapier @ 41

Yes, it became very personal. I was told I was “stupid,” “political” and Geithner cursed me out. They attacked my personal credibility in the press and spread all sorts of lies about me. Sadly, that is just how Washington works.

rapier September 22nd, 2012 at 2:39 pm

Neil, could you address the decision to pay off certain AIG (GS) MBS ‘insurance’ policies.

cs100 September 22nd, 2012 at 2:39 pm

Thanks..well it was the banks that told my neighbors that they would be better off buying instead of renting and then approved them for a 400K home even though their combined income was 30k a year.. of course they lost the house..repeat this millions of times and now families like mine are 200k underwater and obama thinks i want a short sale or a lower interest rate?? No we would like some justice.
I hear you think your public service time is over but if you ran for prez and took Warren for a vp you two would kill it. Its what this country needs.

tuezday September 22nd, 2012 at 2:40 pm
In response to Suzanne @ 63

I did buy it but Amazon bundled/bungled my order. I ordered it on the 9th ferkrissakes and, still, have to lurk, rather than participate.

Can’t wait to read the book.

Mauimom September 22nd, 2012 at 2:40 pm
In response to Neil Barofsky @ 60

Next crisis comes, we’ll bail them out

I continue to ask, just as I did about 2008, so what happens if we DON’T bail them out?

I’m so tired of these hair-on-fire moments of Paulson racing down the hall with his 3 page demand for billions, and vague “the system will completely shut down” threats.

Chapter and verse, please, on what would REALLY happen, and what OTHER actions could be taken to avoid this “catastrophe,”

Neil Barofsky September 22nd, 2012 at 2:41 pm
In response to Mauimom @ 43

Wow, another idea for the new foreword. We need to find new leaders. I think Elizabeth Warren is an example of someone who can rise up above the noise and be a forceful advocate for reform on the national stage. There are people running for Congress and the Senate who advocate breaking up the banks. I do think, though, there is a great danger in holding our noses and voting for the lesser of two evils. They do not see that vote that way, they see it as an enthusiastic endorsement of their policies, and they will continue to take those advocating for meaningful reform for granted. As Nader predicted, it may have to get a lot worse before it gets better.

chicagogal September 22nd, 2012 at 2:41 pm
In response to Suzanne @ 63

Or get it from your local library, and if they don’t have it or have access to it, ask them to buy it. That’s what I did and even though I was the only one who asked for it, my local library did buy it (though I offered to buy it and donate it if they had said no).

Mauimom September 22nd, 2012 at 2:42 pm
In response to Suzanne @ 63

I second your recommendation, Suzanne.

Neil’s book is so READABLE!!! Anyone who doesn’t have it: go buy it. You will love it!

rapier September 22nd, 2012 at 2:42 pm

It is certainly no consolation but I consider Geithner scum. I loved when Dick Fuld called him an errand boy, or some such. It is funny in a sad way he too is held in contempt by the big boys yet continues to be their errand boy. They are rich beyond imagining, he is just a schumck

Peterr September 22nd, 2012 at 2:43 pm

Neil, who among the members of Congress would you say best understands the whole idea of oversight for oversight’s sake (as opposed to making political points or using faux oversight as a fig leaf)?

Neil Barofsky September 22nd, 2012 at 2:43 pm
In response to DWBartoo @ 45

We are on an unsustainable path, and I think that there is a small but real chance of very serious civil unrest. Income inequality is getting greater, and people are suffering greatly while others enrich themselves at their expense. At some point, we may very well reach a breaking point.

Shoto September 22nd, 2012 at 2:44 pm

Mr. Barofsky: It’s an honor to have you here this afternoon. And many thanks to Mr. Dayen for setting it up and moderating.

If Obama is reelected, as now seems likely, what are the chances that he would turn into some version of FDR, given the fact that he never again has to pander for campaign money? (I assume he wishes to position himself for the “Elder Statesman” gigs, post presidency, so that will obviously temper any such ambitions. However…

Is Geithner still in the picture in the 2nd term, or is there a chance that Obama might dump him and bring in someone who isn’t bought and paid for by Wall Street?

Thanks again.

PeasantParty September 22nd, 2012 at 2:44 pm
In response to Neil Barofsky @ 64


Not to worry about how Washington works on individuals. We’ve witnessed it with many others like Spitzor, John Edwards, and many others. Currently Assange with his two Swedish rape victims.

thatvisionthing September 22nd, 2012 at 2:44 pm

Neil, in January, before the mortgage settlement, Abigail Field wrote a two-part article on “Our Morally Bankrupt Government, Justice Edition” and said something I hadn’t heard before, that the mortgage fraud was preceded and exceeded by earlier fraudulent practices against consumer debtors which weren’t caught and stopped:

Mortgage and foreclosure document fraud didn’t grow out of a failure to incarcerate Angelo Mozillo or the top mortgage securitizers, or a failure to sue the banks for defrauding HUD, or a failure to sue them for deceptive mortgage modification practices.

The roots of mortgage and foreclosure document fraud were firmly planted in our bias against consumer debtors, and grew up through debt collectors’ pursuit of credit card and other borrowers less well regarded than homeowners. Amazingly, the document fraud and deceptive practices in our foreclosure courts are in some ways less egregious than the fraudulent practices long used against such borrowers in our small claims courts by debt collectors. Had law enforcement taken a strong stand against abusive creditors then, perhaps we would not have developed the massive foreclosure fraud industry we currently have.

Your take?

Now I’m hearing about OWS and an urge to Strike Debt and a manual they’ve put out. Haven’t grasped the whole of it. Is that a way forward, when Justice and law have failed?

tuezday September 22nd, 2012 at 2:45 pm
In response to chicagogal @ 70

My local library has multiple copies, all on hold, it will be Christmas before my turn comes around, which is why I bought it through Amazon, who decided to hold my order and ship it all at once.

Neil’s book seems to be reaching the right people.

Mauimom September 22nd, 2012 at 2:46 pm
In response to Neil Barofsky @ 69

Thank you. I live in Hawaii, so I have the luxury of NOT voting for Obama, and not being threatened that my crummy vote cost him the presidency and brought us Romney.

I do think it’s important for folks in “safe” states to both VOTE, and to show that they don’t approve of either Presidential candidate. I also suggest approaching down-ticket Dems NOW and getting their commitment NOT to go along with Obama’s requests re the laundry list of bad stuff he’s going to propose post-November.

Any way we can show we DON’T approve of these policies — take it!!

David Dayen September 22nd, 2012 at 2:47 pm

OK, so about the current state of the housing market. The prevailing narrative is that housing has “hit bottom,” with starts, prices, etc. coming back and driving what can be considered a recovery. However, substantial parts – maybe all of it – can be attributed to hedge funds and institutional investors scooping up shadow inventory and distressed homes (either foreclosures or short sales) with capital gathered from the very big banks whose servicing arms are foreclosing on the properties. The goal appears to be to rent out the single-family units for a while, and possibly securitize the rental revenue. This risks generating another speculative bubble in housing, with many of the same financial instruments in the mix.

Meanwhile the foreclosure rescue programs are mostly moribund (HAMP attracts maybe 15,000 new trial mods a month), and all the attention has moved to refinancing. Plus there’s the element of the foreclosure fraud settlement and how many principal reductions will come out of that (so far not much, but we’ll have to wait and see).

Is this your view of the housing market at this point, and what are the biggest risks to this trajectory?

Neil Barofsky September 22nd, 2012 at 2:47 pm
In response to David Dayen @ 47

I actually assumed that the counterattack would have been far more effective that it has been. One thing that has shocked me is how positive the overall media reaction has been, with great reviews in the NY Times (before the horrible one), Fortune, Newsweek, Time, Fox, Fox Biz, Bloomberg TV, etc., and of course many of the blogs. Also, I can’t possibly complain too much, unlike when I first went down to Washington, I knew exactly what I was getting myself into with this book.

DWBartoo September 22nd, 2012 at 2:47 pm
In response to Neil Barofsky @ 60

So, between this bail-out and the next one and the time that it takes to come to our senses, what we might term the “meantime”, as “in the meantime”, just how “mean” are things going to become for the many, during that “time”?

One thinks of the mess “information” on “property” is in, as in the homes of the people, the destruction of a centuries-old county-system of deeds and records, and one imagines that the intellectual thrill of it all palls a wee bit.

Yes, it will have to become quite a bit worse … real pain and agony for some, for many … and eventually, “too much!!”, for everybody.

Would you be willing to speculate as to how long a “time” we are contemplating?


rapier September 22nd, 2012 at 2:48 pm

Neil, do you have any sense that Obama knew that HAMP was designed not to work. What is the status of the, I think, $40 billion of that money.

Larger, is Treasury paying most of the money back to Treasury on an ongoing basis. I recall 3 years ago some Treasury flac telling a congresscritter who was essentially begging for Treasury to give the money back into the General Fund to FO

David Dayen September 22nd, 2012 at 2:49 pm

Strike Debt is very interesting but I’m not convinced yet as to whether they can scale it up.

Neil Barofsky September 22nd, 2012 at 2:49 pm
In response to rapier @ 50

None of the names floated around give me any reason for optimism. Larry Fink seemed to be running parts of TARP (like PPIP), so perhaps in the name of continuity he will get the nod. I haven’t heard any reform-minded names mentioned.

Peterr September 22nd, 2012 at 2:50 pm
In response to Mauimom @ 79

One of the lessons that “Bailout” confirmed for me is the importance of downticket races as a check on the Executive Branch. When Geithner and someone at the White House were leaning on SIGTARP, it was members of Congress that gave him the room to do his job.

And then, on the other hand, there’s Jim Bunning . . .

Shoto September 22nd, 2012 at 2:50 pm
In response to David Dayen @ 80

The goal appears to be to rent out the single-family units for a while, and possibly securitize the rental revenue.

What could possibly go wrong? Sheesh…

chicagogal September 22nd, 2012 at 2:50 pm
In response to Mauimom @ 79

I’d really like to see every state add a “None of the Above” choice and see how that would play out!

Neil Barofsky September 22nd, 2012 at 2:50 pm
In response to PeasantParty @ 54

Extend and pretend, delay and pray, wait for the rest of the bailouts to kick in so that they could, in Allison’s words, “earn their way out of it.” That was the HAMP strategy.

Peterr September 22nd, 2012 at 2:52 pm
In response to Neil Barofsky @ 85

I take it you’re not expecting a phone call from either the Obama or Romney folks, regardless of who wins in November?


PeasantParty September 22nd, 2012 at 2:52 pm
In response to David Dayen @ 80

Excellent! Thank You. I will await the response. Still have my thoughts on the Land War thingie, but we shall see what the future holds.

I do know that some borrows are now getting in at 2.75% and some lower. However, to refi you are shit out of luck on the great deal even if you buy points.

Neil Barofsky September 22nd, 2012 at 2:54 pm
In response to Peterr @ 59

He was very sensitive to our criticisms of his handling of the AIG bailout as FRBNY president when he paid out to AIG’s bank counterparties 100 cents on the dollar. It was one of the biggest mistakes Obama made, he could never make a clean break from those awful bank-centric policies once he made Geithner his Treasury Secretary, and it is not surprising that at every critical juncture that followed administration policy favored maintaing and preserving the TBTF banks.

bmaz September 22nd, 2012 at 2:54 pm

Hi Neil, welcome to FDL. You touched on “prosecutions” just a tad with Marcy above. I’d like to drill a little deeper into that though, and as a former AUSA in SDNY, you are the perfect expert to answer my question.

The Administration and DOJ has effectively whitewashed the banks and finance companies and, even were that no the mindset, statutes are beginning to run. The mantra is “no criminal activity” and/or “it is too complex” and the like. Do you agree with that? The wide applicability of good old standard fraud always seems to work fine for them when coming after my clients, why not use on the banksters?

David Dayen September 22nd, 2012 at 2:55 pm
In response to Shoto @ 87

Working on a larger piece about this so stay tuned…

PeasantParty September 22nd, 2012 at 2:56 pm
In response to PeasantParty @ 91


I should say that the investors are getting loans in at 2.25% and there about. Regular home buyers can forget that kind of interest rates.

Neil Barofsky September 22nd, 2012 at 2:56 pm
In response to Suzanne @ 63

Thank you, it means a lot to me. One of my biggest goals was to make it readable and accessible, so that people can realize that they should not believe it when the government or Wall Street lobbyists proclaim that all of this stuff is just too complicated for anyone without a banking background to understand. It’s not true, but they use that supposed complexity to control the dialogue.

rapier September 22nd, 2012 at 2:57 pm

Sorry to pepper you and this isn’t even a question. My sense is that Obama had no choice because there in nobody within government institutions or those who influence them who takes ‘our’ side. Or in other words there is nobody to turn to that would even consider change.

Neil Barofsky September 22nd, 2012 at 2:57 pm
In response to rapier @ 65

I do at length in the book. But it was unjust, unfair and unnecessary. A backdoor bailout of the worst proportions.

thatvisionthing September 22nd, 2012 at 2:58 pm

Neil, any thoughts on “private right of action” as a way to bring the law to bear on behalf of citizens when federal/state AGs won’t prosecute? I don’t know the big implications of what I’m talking about, I’ve just heard the phrase. I’m in California.

David Dayen September 22nd, 2012 at 2:59 pm
In response to PeasantParty @ 95

Heck, they’re not even doing loans. They’re paying cash.

thatvisionthing September 22nd, 2012 at 3:01 pm
In response to David Dayen @ 100

Are the investors rich private individuals, or corporations?

DWBartoo September 22nd, 2012 at 3:01 pm
In response to Neil Barofsky @ 89

Are we dealing with hubris, arrogance, and “certainty”, things that would be typical of the sociopath, or incompetence, craven indifference, and greedy self-interest, things more typical of the “every-day” Congressional “type”?

An amalgam of the two?

Or an entirely new species, perhaps even aliens?

Do you imagine, Neil, that “things”, the “gummit”, the “systems”, all of them, can be “fixed”, or ought we, now, begin to envision, plan, and begin to build a new, more sane, sustainable, and humane society?


PeasantParty September 22nd, 2012 at 3:01 pm
In response to David Dayen @ 100

Yeah, the big boys are. Here there are investors, and groups that aren’t in the big leagues yet. I guess you could call them “Old Flippers”.

Neil Barofsky September 22nd, 2012 at 3:02 pm
In response to Mauimom @ 68

I don’t know. It’s unknowable. I do believe that both Paulson and Bernanke truly believed that it would have been awful, and when we audited the Citi rescue, I could see how that bank going down could have horrific systemic consequences. I also was surprised to see in the excerpt from Bair’s book that she didn’t think it was necessary,

But it almost doesn’t matter. What matters is the presumption in the market that we will bail them out, which will incentivize more risk and lead us to another crisis. What matters is that next time the policy makers will once again believe that they will have to bail them out, so they will. Wash, rinse, repeat, or as Simon Johnson calls it, the doomsday cycle. It is why the republicans claim that they just won bail ‘em out again is laughable. To avoid bailouts, you have to remove the threat NOW. And that can only be done by breaking them up.

David Dayen September 22nd, 2012 at 3:02 pm

In fact, the California Homeowner’s Bill of Rights (operative 1/1/13) adds a private right of action for foreclosure cases. This will help to change the game as long as Fannie/Freddie don’t keep bullying the states by charging higher fees to those that don’t let foreclosures pass through as quickly as possible.


David Dayen September 22nd, 2012 at 3:02 pm

Talking about institutional investors, hedge funds, private investment firms, things like that.

Neil Barofsky September 22nd, 2012 at 3:03 pm
In response to rapier @ 72

I suspect that he will soon enjoy similar wealth

PeasantParty September 22nd, 2012 at 3:03 pm

The ones I come across are individuals in the Charlotte, NC area. Of course True Homes and Boston National make huge deals with them nationwide.

DWBartoo September 22nd, 2012 at 3:03 pm
In response to bmaz @ 93

Delightfully superb question, bmaz.

Great to “see’ you here, btw.


Neil Barofsky September 22nd, 2012 at 3:05 pm
In response to Peterr @ 73

It’s all for some political purpose, that is the nature of Congress. But I thought Grassley, Issa, Cummings and Baucus all were sincerely supportive of our efforts (I know, some of those are not the names you think would show up), and I think that Baucus and Cummings, because they were going against the wishes of the Administration in supporting us, are particularly noteworthy.

RevBev September 22nd, 2012 at 3:07 pm
In response to Neil Barofsky @ 107

And will he remember to pay his taxes?

bearman September 22nd, 2012 at 3:08 pm

Neil…what do you think of the future since no one in either party is interested in being the reforms to the FS sector needed to get the country back on it’s feet. The corruption is so deep are we at a tipping point. Please tell us if there is enough will out there to make the changes and what can we do as regular people to get something done.

Neil Barofsky September 22nd, 2012 at 3:09 pm
In response to Shoto @ 75

Geithner has announced he is leaving. As to the first part of your question, I don’t think it is very likely. I think there is a tendency (myself included when I first got to DC) to demonize Geithner and absolve the President. But there is a very good reason that Geithner is the last member of the economic team still in place, and it’s because, I believe, the President and Geithner have a similar vision. So I do not expect the “real” Obama to emerge, I think we have already seen the “real” Obama.

thatvisionthing September 22nd, 2012 at 3:10 pm
In response to David Dayen @ 105

A story from yesterday! Haven’t caught up to you yet. I try to follow you and am grateful for all you do. I think I heard the phrase though in a Mandelman podcast two-part interview of Neil. But I have a lot of brain dropout during podcasts so I can’t remember what they said — my fog says it could be a big game changer.


Peterr September 22nd, 2012 at 3:13 pm

One episode from the book:

One day about five months in, I asked Kris [the communications director] if she could find out how many hits we’d had [on the SIGTARP website]. Kevin [Neil's deputy] suggested that we all make bets about what the number would be, and I declared that The Price is Right rules were in effect. Whoever got the closest without going over would receive the meaningless title of “SIGTARP employee of the week”. Kevin guessed 15,000, Lori [legislative affairs] guessed 10,000, Kris guessed 25,000, and I bullishly bet on 50,000. The next day, Kris came in with the actual number: 12 million. When she first told me, I looked at her as if she were Wilt Chamberlain claiming that he had slept with more than 10,000 women. Kevin joked that the URL must be one letter off from a porn website, recalling that one of our candidates for a toll-free number had in fact been an active sex line. But the number was correct. Clearly people were deeply interested in the inner workings of TARP, and by the time I left SIGTARP, we had more than 50 million hits and 3.6 million downloads of our quarterly reports.

Between these stats and the way you used David Dayen’s FDL piece on the Fletchers, it’s clear that the internet is changing the landscape in DC.

What media websites/writers/bloggers do you think do the best job of getting it right when it comes to covering DC? What is it about their work that sets them apart from, for instance, the Washington Post editorial page?

Neil Barofsky September 22nd, 2012 at 3:13 pm

If Abigail said it, pretty good chance she is correct, and I wholeheartedly agree that the banks & washington have perpetrated this myth that people who cannot pay their bills are some subspecies of human being. Every time you hear an official utter the word “responsible homeowner” it is a dog whistle for that propaganda. With that said, intentionally defaulting is a very individualized decision. There are potentially significant collateral consequences that people need to consider, and I think people need to tread very carefully.

Shoto September 22nd, 2012 at 3:14 pm
In response to Neil Barofsky @ 113

I believe, the President and Geithner have a similar vision.

Naive though it undoubtedly appears, I was sort of hoping against hope for some kind of evolution in Obama’s thinking, given that the strategy of the past four years has been (for all practical purposes) a complete bust. One would think he’d want to leave some sort of positive legacy behind in this area.

Sorry, I had a little spell…but I’m all better now.

DWBartoo September 22nd, 2012 at 3:15 pm
In response to RevBev @ 111

One imagines that Geithner will have “arranged” things to not have to piddle with taxes, RevBev. Indeed, one imagines that, like Haliburton, wee Timmy will rate a tax “credit”, you know, in light of all that he has done for us, loyally, patiently, and so very professionally, in recent years.

He won’t do as “well” as Obama, in the long run, however Timmy might well match Bill Clinton’s paltry $200 million …

Life is REALLY hard at the top, but there are compensations, to be had …

(One hopes that this is not too far off the humor and tragedy of the subject of the Book Salon?)


Neil Barofsky September 22nd, 2012 at 3:15 pm
In response to Mauimom @ 79

I agree that it’s very important to vote if you are dissatisfied with both candidates to help send that message.

Jim White September 22nd, 2012 at 3:15 pm
In response to Neil Barofsky @ 104

But it almost doesn’t matter. What matters is the presumption in the market that we will bail them out, which will incentivize more risk and lead us to another crisis. What matters is that next time the policy makers will once again believe that they will have to bail them out, so they will. Wash, rinse, repeat, or as Simon Johnson calls it, the doomsday cycle. It is why the republicans claim that they just won bail ‘em out again is laughable. To avoid bailouts, you have to remove the threat NOW. And that can only be done by breaking them up.

As you described so well in the past, this process of the banksters knowing that they will not be the ones to bear the burden when their risky behavior causes losses is the definition of “moral hazard”.

Thank you so much for putting that phrase into the public discussion.

Peterr September 22nd, 2012 at 3:16 pm
In response to Neil Barofsky @ 110

Having read the book, those names don’t particularly surprise me, except for Issa to a certain degree. Yes, he helped your office out when you were getting stonewalled or pressured by others, but how many times can a member of Congress get away with breaking an embargo on a report they’ve been given in advance, before people start refusing to give them advance copies? If I recall correctly, you describe at least two instances where he did just that with your work.

Suzanne September 22nd, 2012 at 3:17 pm
In response to Neil Barofsky @ 96

*squeal* thank you for responding! your style is very readable and i learned a lot without feeling like i was reading a textbook.

i saw upthread that you are thinking about blogging – fdl does have myfdl as a platform for anyone wishing to write a post. i know i would love to read any posts you might want to write. you could consider it a test run to see if blogging feels right for ya.

Neil Barofsky September 22nd, 2012 at 3:18 pm
In response to David Dayen @ 80

I think you’ve nailed it David. The lurking shadow inventory and an anemic recovery that could turn on a dime. The Simon Johnson piece up on Naked Capitalism today sets out the real threats to our economy, and of course housing will come tumbling back down when we hit the next rough patch. And boy do I worry for the renters of those vulture investor houses.

spocko September 22nd, 2012 at 3:18 pm

Thanks for being her. I was going to ask a very similar question to the great question MauiMom asked. So I’ll ask another.

“What, if anything, are the financial wrong doers afraid of?”

Then: What can we do to make their fears come true?”

Please pick someone specific to illustrate. Thank you.
P.S. I asked this question of Matt Tiabi about the Goldman Sachs. He said, “It’s not journalists, that’s for sure.”

RevBev September 22nd, 2012 at 3:18 pm
In response to DWBartoo @ 118

Thanks, I was naive to ask. But he did forget before….

Neil Barofsky September 22nd, 2012 at 3:19 pm
In response to DWBartoo @ 82

No idea. So many external factors at play (Europe, Japan, the next bubble). Could be next year, could be 10 years (although I doubt it will take that long).

Neil Barofsky September 22nd, 2012 at 3:21 pm
In response to rapier @ 83

It doesn’t get borrowed until it needs to get used. So it isn’t actually sitting in an account gaining cobwebs. The Congresscritter was really talking about budgetary accounting, but the leftover HAMP money is still obligated and available for Treasury to use.

Neil Barofsky September 22nd, 2012 at 3:22 pm
In response to rapier @ 83

Sorry, missed the first part of your question. I really have no idea at all.

thatvisionthing September 22nd, 2012 at 3:22 pm
In response to Neil Barofsky @ 116

One of their points I read (in a DDay story?) was that they felt the unchecked debt fraud cycle was killing the nation and the planet (my paraphrase) and that debt strikers were heroes acting for us all. (I’m noticing that my paraphrase could apply to generic martyr/hero recruitment.)

Neil Barofsky September 22nd, 2012 at 3:23 pm
In response to Peterr @ 90

No, but I would take one from either one if they saw the light…..

David Dayen September 22nd, 2012 at 3:24 pm

Since Eric Schneiderman recently came out and hinted at an “October surprise” of some prosecution as part of his financial fraud task force, perhaps we should discuss that. What form do you think this will take? Will it be as lame as some unrelated Libor prosecution that they try to sell to the public as accountability? How receptive will the press be to whatever they peddle?

DWBartoo September 22nd, 2012 at 3:25 pm
In response to RevBev @ 125

Quite all right, RevBev, we unimportant “little” people often make mistakes, unlike those whom we have the audacity to now be discussing and cussing.

Frankly, I know that you are not naive, but not too far away from this discussion a great deal of that “perspective” is frightened out their wits at the latest political Kabuki … and as Neil suggests, we are in for “more of the same”, and likely we are going to “get it” just as Mencken long ago anticipated, that is, “… good and hard.”

Ah, well … learning is on a curve and the wrong people are driving.


bmaz September 22nd, 2012 at 3:25 pm
In response to David Dayen @ 131

Is that not presumptively some limited LIBOR prosecution?

Neil Barofsky September 22nd, 2012 at 3:26 pm
In response to bmaz @ 93

Marcy had one of the most important posts to answer that question. She recounted a recent speech in which the AAG acknowledged that he had heard what he described as compelling arguments that bringing certain cases could potentially put the global economy at danger. We spent trillions bailing them out, there was no way that DOJ was going to undo all of that hard work by bringing indictments. Too Big To Jail.

Shoto September 22nd, 2012 at 3:26 pm

Mr. Barofsky: Do you have any sense of how interest rates (particularly long rates) are going to behave over the next, say, two to five years? What about the actions of the Fed? It would seem to me that they’re essentially out of bullets, and that any actions they might take on a go-forward basis would be largely to assuage any trepidation in the markets.

thatvisionthing September 22nd, 2012 at 3:28 pm
In response to Neil Barofsky @ 119

One thought I have about write-in votes, which is: Stephen Colbert. He ran SuperPAC ads in Iowa I think for a fake candidate “Rick Parry” with an “a” but when the votes were tabulated I don’t think he was able to get a tally for “Rick Parry” separate from Rick Perry. I don’t know the requirements to even report write-in votes, which hugely blunts their impact.

Neil Barofsky September 22nd, 2012 at 3:29 pm
In response to rapier @ 97

No offense, but I think that is utter nonsense. There are plenty of reformers out there, and the decision was to keep them out. Elizabeth Warren? Stiglitz? Krugman? Even a real role for Paul Volcker? Confidence Men by Suskind details the early decision making process to go with Summers/Geithner, and there have been plenty of chances since then. He picked the guys he wanted.

Phoenix Woman September 22nd, 2012 at 3:30 pm
In response to Neil Barofsky @ 104

As Bernie Sanders says, too big to fail is too big to exist.

Neil Barofsky September 22nd, 2012 at 3:30 pm

If we can’t put them in cuffs, they let’s go after their pocketbooks. Private action gives victims the right to sue to enforce the rules.

Shoto September 22nd, 2012 at 3:31 pm
In response to bmaz @ 133

Will it be as lame as some unrelated Libor prosecution that they try to sell to the public as accountability?

As I noted previously, when Schneiderman brings the hammer down, the night janitor’s not going to see the action as “lame.” And that guy who monitors the parking garage? Absolute hell to pay.

Shoto September 22nd, 2012 at 3:31 pm
In response to Phoenix Woman @ 138

Copy that.

Neil Barofsky September 22nd, 2012 at 3:32 pm
In response to DWBartoo @ 102

Baby steps. Let’s smash up the banks, and go from there.

PeasantParty September 22nd, 2012 at 3:32 pm
In response to Neil Barofsky @ 139

Yes, and refuse a corporate style coup via mediation. By all means, refuse mediation!

Demand trial by jury.

RevBev September 22nd, 2012 at 3:33 pm
In response to Neil Barofsky @ 137

Is the mess part of the reason for Ms. Roemer’s early departure; I had read she was not treated well.

Neil Barofsky September 22nd, 2012 at 3:33 pm
In response to PeasantParty @ 103

In doing radio interviews, I was surprised to hear commercials in CA and MN pitching “get rich by flipping real estate” seminars. The more things change…..

Neil Barofsky September 22nd, 2012 at 3:34 pm
In response to RevBev @ 111

We can hope. Maybe he’ll even overpay!

RevBev September 22nd, 2012 at 3:35 pm
In response to Neil Barofsky @ 147


David Dayen September 22nd, 2012 at 3:36 pm
In response to Neil Barofsky @ 146

House flipping shows have returned to television.

bmaz September 22nd, 2012 at 3:36 pm
In response to Neil Barofsky @ 134

I understand the Too Big To Jail issue; I am more perplexed by the constant insistence by the Administration that there is nor really particular criminal conduct. Do you agree that, irrespective of whether should be, there could be prosecutions and that there are actually in many cases actually pretty standard legal theories that could be so brought to bear?

Would there not be the capability of some appropriate, if selective, prosecutions without crashing the larger enterprise? Or would the collective on Wall Street simply throw a tantrum?

Neil Barofsky September 22nd, 2012 at 3:37 pm
In response to bearman @ 112

The American Banker recently had a story that said that suggested that there were votes in both the House and the Senate to break up the banks, but that the leadership will never let it happen. We need to find candidates who support breaking them up and support them. We need to continue to be loud that this is an important issue. Still trying to figure out what else……

spocko September 22nd, 2012 at 3:37 pm
In response to Neil Barofsky @ 146

I was surprised to hear commercials in CA and MN pitching “get rich by flipping real estate” seminars

Do you suppose WS execs attended those? “Hey look at all these suckers-er investors. They really need some capital. I should give it to them.”

thatvisionthing September 22nd, 2012 at 3:38 pm
In response to Peterr @ 144

Thank you! I can’t keep up with her, wish I could. She’s great, I’m slow. Her posts go flying by like chocolates on Lucy and Ethel’s conveyor belt.

PeasantParty September 22nd, 2012 at 3:38 pm
In response to Neil Barofsky @ 146

Yep. We have large swaths of land that were bought up by developers and broken down into lots. Now, they can’t sale or build those lots but older housing is on fire with sales and swaps.

Shoto September 22nd, 2012 at 3:39 pm
In response to bmaz @ 150

I am more perplexed by the constant insistence by the Administration that there is not really particular criminal conduct.

I’ve wondered the same thing, particularly in light of William Black’s repeated assertions that the industry is rife with control fraud, that it is a “criminogenic” environment.

DWBartoo September 22nd, 2012 at 3:39 pm
In response to Neil Barofsky @ 137

Exactly correct, Neil, Obama chose precisely whom he wanted, with advice, no doubt, to fill specific positions, one thinks of Cass Sunstein, on another level of “compromise” and the unwillingness to “criminalize policy differences”.

And, one imagines, that Obama knows, full well, for example, that pressure is being put on certain states to allow the speed-up of foreclosures …

Obama is a clever chap …

Perhaps too clever?

However, as Mencken also mentioned, there’s “something” about “estimating” the “sensibilities” of a gullible public … when it comes to politics and politicians.

Less often do we hear “Obama is a poor victim … of …” regarding many things …

A slow process it is, however.


Peterr September 22nd, 2012 at 3:41 pm
In response to Neil Barofsky @ 134

One of the reasons that accountability is hard to come by in DC, in my opinion, is that too much of the work is impersonal. “The White House says . . .” or “The DOD did x, y, and z . . .” or “OMB squashed a, b, and c . . .” or “1, 2, and 3 got stopped up on The Hill.” Insiders may know the person who said or did these things, but to the rest of the world, it’s all an unaccountable mess.

The same holds true for the TBTF banks. “Goldman Sachs says . . .” or “JPMorgan believes . . .” or “BofA wants . . .” etc, etc., etc.

When individuals are not held to account for their actions as officers and employees of their company, fines become just another cost of doing business and robo-signing becomes standard procedure.

I was encouraged by the fact that you were generally more forthcoming than most to name names — here’s the person who did X. Any ideas about encouraging more individual accountability?

PeasantParty September 22nd, 2012 at 3:41 pm
In response to Neil Barofsky @ 151


Occupy Wall Street has been loud and even scared them for a while until they bought up the police and remaining politicians. How do you feel about the slogan, “Banks got bailed out, We got sold out!”?

Neil Barofsky September 22nd, 2012 at 3:42 pm
In response to Peterr @ 115

The best are those that do not depend on access to ply their trade, but actually do real reporting. Dayen (of course), Yves Smith, Barry Ritholtz. Gretchen Morgenson has to be one of the most independent voices out there in the MSM, Jesse Eisinger (propublica) gets it right, and I’m a big fan of Jon Weil (Bloomberg). Simon Johnson is brilliant. I’m sure that there are others as well that I just forgot.

Shoto September 22nd, 2012 at 3:44 pm
In response to PeasantParty @ 158

Personally, I like: “Make Wall Street pay for the damage it has done.” Simple, clear, and to the point.

spocko September 22nd, 2012 at 3:45 pm
In response to PeasantParty @ 158

Interesting. I wonder if Occupy Wall Street DID in fact scare them? Did it Neil? And, if so, what aspect of OWS scared them?

I keep wanting to know what has real leverage over these people. I don’t think it is bad PR. Jail? Fear of having to pay more in taxes? Fear of not making as much money as last year? Fear of losing easy money making programs?

Fear of violence?

Neil Barofsky September 22nd, 2012 at 3:45 pm
In response to Peterr @ 121

Yes, it became annoying, but like anything else, you just have to adapt to the reality that is Washington. So we just started to assume he would break it. As Chair of the Oversight Committee, withholding reports was never an option, so we eventually would tell his staff when it was really really really important for them not to break an embargo, and they generally started to honor that request. If not, we just buckled up for the ride.

DWBartoo September 22nd, 2012 at 3:45 pm
In response to Neil Barofsky @ 142

Smashing the banks will require a public willing to don ten-league boots of understanding and an admission that an economic system must serve all of the people …

Accusations of “class warfare” and “socialism” will be raised immediately ANY meaningful progress might be made on the “breaking” … and it will require, further, a political class put in their place, as SERVANTS of the people which will bring down the national security state on the people.

Do you imagine that there is any actual likelihood that the banks will be broken up by the current ruling classes, the corporate and monied elite?


Peterr September 22nd, 2012 at 3:47 pm
In response to Neil Barofsky @ 162

I figured as much. To borrow from Leona Helmsley, embargoes are for The Little People.

Neil Barofsky September 22nd, 2012 at 3:47 pm
In response to spocko @ 124

They are terrified of Elizabeth Warren, I suspect. They just hate journalists, except for those who will quote them as “a senior bank official” and then reprint their lies, or who will go after their enemies for them. They, they love.

PeasantParty September 22nd, 2012 at 3:48 pm
In response to Shoto @ 160

:-) Big Grins!

The thing I am most concerned about is the Land Records systems. That has been a real mess and affected every single County Register across the entire Nation. MERS is it’s own virtual property transfer system and nobody in Washington seems to understand this or what it means going down the road. I think they are all a bunch of dumbasses and studied only how to swindle people and get into office.

DWBartoo September 22nd, 2012 at 3:48 pm
In response to Peterr @ 157

Best comment from the community, Peterr, by far!


What a concept.

And “personal accountability”, no less.


Perhaps, a functioning rule of law might encourage better behavior?

Just a thought …


bmaz September 22nd, 2012 at 3:49 pm
In response to Shoto @ 155

Neil is right, there are larger considerations; but it just drives me nuts. From everything i know from 25 years of practice, the criminal cases are there for the making, and they not need be all that complex. Just a few of em would go a long way.

And busting up the behemoths as Neil says.

PeasantParty September 22nd, 2012 at 3:51 pm
In response to spocko @ 161

One thing I realized when BOA was showing they were nervous was when public scrutiny was on them. Headlines of wrong doing etc, seemed to upset them more than anything.

Their Mortgage Section of the Bank still owes TARP money even though on the front page of the payback roster is looks as though they have repaid all.

Neil Barofsky September 22nd, 2012 at 3:51 pm
In response to David Dayen @ 131

Ha ha ha. If they roll out a LIBOR case under the RMBS Task Force they will deserve the drubbing from the media that they will receive. I think it almost certainly will be some civil case that will mean absolutely nothing to the defendants involved and will be settled with no personal accountability, just shareholders and D&O insurance picking up the tab. Or they will trot out some low level prosecutions that have been kicking around for years that will be rebranded as RMBS Task Force cases. But a real criminal case against a very senior bank official? Better chance of you becoming the next Treasury Secretary and me the next Attorney General.

thatvisionthing September 22nd, 2012 at 3:52 pm
In response to bmaz @ 168

bmaz, is private right of action a game changer then? Wouldn’t that always have been available? I’m not understanding the big thing I think. Why hasn’t it worked already?

bmaz September 22nd, 2012 at 3:53 pm
In response to Neil Barofsky @ 170

Well, hell, where can I vote for that ticket?

David Dayen September 22nd, 2012 at 3:54 pm

So Neil, thanks so much for coming by and answering our questions, and for continuing to fight the good fight. Pleasure having you here.

BevW September 22nd, 2012 at 3:54 pm

As we come to the end of this great Book Salon discussion,

Neil, Thank you for stopping by the Lake and spending the afternoon with us discussing your new book and your experiences.

David, Thank you very much for Hosting this great Book Salon.

Everyone, if you would like more information:

Neil’s website (NYU) and book (Bailout)

David’s website (FDL News)

Thanks all, Have a great weekend.

Tomorrow: Jonathan D. Moreno / Mind Wars: Brain Science and the Military in the 21st Century; Hosted by Jeff Kaye

If you would like to contact the FDL Book Salon: FiredoglakeBookSalon@gmail.com

Shoto September 22nd, 2012 at 3:54 pm
In response to PeasantParty @ 166

It would seem to me that after all the slicing, dicing, selling and reselling of real estate that has taken place over the past however long, firmly-established real estate law has been pitched into a cocked hat; who owns what, and prove it. And I seriously doubt this is an exception.

bmaz September 22nd, 2012 at 3:55 pm

Too costly and hard to pull off private litigation. Best you can hope for is that organizations help a few people out. The rest have neither the resources or time – they are losing their homes.

bearman September 22nd, 2012 at 3:55 pm
In response to Neil Barofsky @ 151

maybe we should call for the breakup of the DNC and Rep National Comm :)

bmaz September 22nd, 2012 at 3:55 pm

Great discussion guys, thank you both!

Jim White September 22nd, 2012 at 3:56 pm

Thanks for a terrific discussion, Neil and thanks one more time for your service.

Thanks for hosting, David. There could have been no other choice.

And Bev, thanks one more time for the miracles you work on a daily basis.

spocko September 22nd, 2012 at 3:56 pm
In response to bmaz @ 168

I can imagine that they don’t even want a single person mid-level to get nailed because then they might decide to turn states’ evidence and get bigger fish.

Of course we all know how poorly Obama treats whistleblowers…

I had great hopes for the SEC new whistleblower program, I wonder if anyone will use that? The whistleblower can get up to 15 percent of the case I believe. I wish I had the expertise to help them (and then in turn bring more whistleblowers out once they see they can get money for their revealing wrong doing. I would then have those people fund groups that help others go after financial fraud. It’s one thing to fight regulators who you can buy off or promise jobs to in the future, it’s another to try and keep quite people who know the system were screwed by it and can take your money, legally, for your bad practices.

Neil Barofsky September 22nd, 2012 at 3:56 pm
In response to bmaz @ 150

So I suspect all of these things are interconnected. Not a lot of incentive to build a complex case if you know that it will never see the light of day. Biases are also very strong, and there has been an erosion within the DOJ in its skills of pursing accounting fraud cases. So those explanations could be a justification, an excuse, or a rationalization, or even, possibly, accurate (although I doubt it).

Neil Barofsky September 22nd, 2012 at 3:58 pm

Whoops, out of time! Big thanks to FDL, Bev, David and everyone who asked such terrific questions!

Shoto September 22nd, 2012 at 4:00 pm
In response to bmaz @ 168

Yes, a few high-profile cases would definitely go a long way. As for breaking up these unmanageable entities, I see no reason why using the model that was established during the S&L crisis wouldn’t work very nicely, albeit on a larger scale. Same template, larger scale. The only thing that’s lacking is the will to do so. Meanwhile, the statutes continue ticking away…

PeasantParty September 22nd, 2012 at 4:01 pm

Thanks Neil!

If you happen to come back and read over this again, we would like to know more about other Mortgage Insurance Corps other than AIG and how they are working with TBTF to keep from paying claims on behalf of the buyers.

thatvisionthing September 22nd, 2012 at 4:01 pm
In response to Neil Barofsky @ 182

Thanks for coming! I’ve been looking forward to your visit here. Fan of these longer form interviews.

DWBartoo September 22nd, 2012 at 4:05 pm

Thank you, Neil and David, a most excellent Book Salon.

Thank you, Bev, as always.

Thanks to all commenters.

And especial thanks to FDL for providing this opportunity of meaningful, rational, respectful, and reasonable discussion.


Peterr September 22nd, 2012 at 4:05 pm
In response to Neil Barofsky @ 182

Thank you, and come by any time.

bmaz September 22nd, 2012 at 4:06 pm
In response to spocko @ 180

If it is tied to the SEC, I have little faith in it. But we can hope.

bmaz September 22nd, 2012 at 4:09 pm
In response to Neil Barofsky @ 181

Yes, I think that is likely right. Also think the dismantling of the accounting fraud machine is a tragedy more should understand and discuss. I have another friend that was in SDNY during those years; she says the same thing.

thatvisionthing September 22nd, 2012 at 4:12 pm
In response to bmaz @ 176

So the ship sinks and only a couple are saved? Then what? I’m reminded of when David Simon of The Wire was interviewed and he said what The Wire was about was when people have become worthless, expendable, then what? They’re criminalized and incarcerated and basically wasted. There’s no need for them. Maybe the point is that with self-creating money for the 1% there is no need for 99% of us anymore and it’s just taking a while to downsize us away? What do you hope for?

thatvisionthing September 22nd, 2012 at 4:34 pm

Interview was from 2009 — Simon was talking about only 10-15% then.

DAVID SIMON: “What am I doing here? What am I doing here?” You know, all the same problems that a guy coming out of addiction at 30, 35, because it often takes to that age, he often got into addiction with a string of problems, some of which were interpersonal and personal, and some of which were systemic. The fact that these really are the excess people in America, we– our economy doesn’t need them. We don’t need ten or 15 percent of our population. And certainly the ones that are undereducated, that have been ill served by the inner city school system, that have been unprepared for the technocracy of the modern economy. We pretend to need them. We pretend to educate the kids. We pretend that we’re actually including them in the American ideal, but we’re not. And they’re not foolish. They get it. [...] They understand that the only viable economic base in their neighborhoods is this multi-billion drug trade.


DAVID SIMON: It’s almost — he’s describing a capitalist pyramid. Where nobody moves. Where there is no improvement in anyone’s station. And we were basically setting out a preamble for what the next five seasons would show, with regard to the city. You know, in second season there was a character who said, almost prescient of the of the Wall Street debacle. He said, “We used to make stuff in this country. Build stuff.” He didn’t say ‘stuff’ but it’s HBO. But he said, “Now, we just put our hands in the next guy’s pocket.”


And we knew that character that cited what was ailing post-industrial America, he happened to be a union captain and one of the longshoreman. That he would be speaking to, at the time, what we were reacting to with Enron and things like– and WorldCom and the first sort of– first shots across our bow, economically. That people were trading crap and calling it gold. And that’s what THE WIRE was about. It was about that which is– has no value, being emphasized as being meaningful. And that which is– has genuine meaning, being given low regard.


BILL MOYERS: So, whose lives are less and less necessary in America today?

DAVID SIMON: Certainly the underclass. There’s a reason they are the underclass. But in an area– in an era when you don’t need as much mass labor. When we are not a manufacturing base those people that built stuff, that made stuff– that were– that their lives had some meaning and value because the factories were open. You don’t need them anymore.

fatster September 22nd, 2012 at 5:08 pm

Just love it, tvt, that your great quote ended this most impressive Q & A.

juliania September 22nd, 2012 at 5:47 pm

Thank you all for a very interesting Book Salon. As Mr. Barofsky referred three times to Simon Johnson’s piece at nakedcapitalism.com I went there to read that. I must say it confused me, compared to what Mr. Barofsky is saying here, and perhaps someone will write a diary explaining what seems to be a disconnect between progressive policy in general and the specifics of the article which Mr. Barofsky holds in such high regard.

As I’ve said many times, I’m no economist, and in general I’ve had similar dark thoughts as are expressed in the doomsday article. However, there’s a debt/growth scenario there which a lot of the comments at nakedcapitalism seemed to take issue with, and certainly sound like neoliberalism to my admittedly ignorant ear. So sorry I can’t home in on more than that, just noting what seems to be a discrepancy. I’ll return here later, if anyone can explain it to me.

HotFlash September 22nd, 2012 at 6:20 pm
In response to Suzanne @ 122

Hear hear!

thatvisionthing September 25th, 2012 at 4:41 pm

While comments are still open, just want to add parts of Neil’s interview with Martin Andelman in the podcast referenced above, posted September 14, 2012 – my own transcription, none posted there:

Break up the banks, or boom, bust and bailout

32:40 NEIL BAROFSKY: So it becomes this belief system that protecting the giant Wall Street banks and enabling them to profit will ultimately be the end game, and that it’s a proper end game, and that everything good will follow from that. And as you said, you’d think that here we are in 2012 with such a stagnant recovery, with still so many people unemployed, so many millions of people losing their homes, that somebody – either a politician or within the administration or perhaps one of the guys running against him – would step up and say, “No! This system is broken! We need to rethink this. We need to prioritize and put the interests of the homeowners and the middle class above those of the large financial institutions.” But that’s not where the money and the power is. And ultimately where the money and the power is is where the politicians go, and that’s why we have two candidates running against each other who are both committed to maintaining the size of the Too Big To Fail institutions, who don’t advocate for the extremely common-sense solution that so many people are now beginning to understand and comprehend and which I’ve been advocating for years now, which is that we need to break the banks up.

But this is one area where there’s absolutely no daylight between Mitt Romney and Barack Obama. And their statements on this, you could change the names and you wouldn’t know who was saying what. But that’s the reality of our political system. And we need to wake people up. And we need for them to understand that this is one of the biggest problems facing this country is the power of these banks and that we need to elect politicians who will commit to breaking them up, not maintaining the status quo. Otherwise it’s going to continue in this downward spiral where we see more income inequality, and a very, very fragile economic system that’s prone to boom, bust and bailout.

HAMP fatigue and David Dayen

34:20 MARTIN ANDELMAN: That’s right. And look, I’m one of those persons who would say I’m never sure what they mean by this, the way they talk about “sluggish recovery.” I mean, at what point does it stop being a recovery? It’s just – it’s just not. I mean, you know, it’s like, well I guess like, I guess you could find some measurement somewhere, but I mean people are not feeling any sort of – it’s become a joke, they stop listening. You know, I know a lot of homeowners that just don’t – well, look a the OCC, the independent foreclosure review. Right? I mean, there were supposed to be 4 million and I guess, you know, I don’t know, 200,000 people applied. And they said “Well, it was because it was too complicated.” No. It’s like, it’s not complicated. No one believes you.

NEIL BAROFSKY: No, it’s the concept that so many housing counselors use called HAMP fatigue, which is basically fool me once, fool me twice, fool me 17 times, and you know homeowners and people who get so burned by these programs and get nothing from the government besides empty promises and being told how successful the program is, they’re turned off. And it’s sort of understandable. How many times are you going to allow yourself to be victimized by a government program? And even though, you know, there may be a real – you know, some of these things, particularly some of these more recent settlements may have an opportunity to do good for a small number of homeowners, but if it’s no good for homeowners, people are going to be chased away, because they don’t believe it. And frankly you can’t blame them after the horrific treatment that they’ve received.

You know, I just used one in the book, one that David Dayen had reported over at Firedoglake just as an example of just one, you know, one guy who could have easily just sold his house while he still had equity and sort of managed his life who got sucked into the HAMP vortex for a year and a half and it destroyed him, and had an impact on his family. And I just used one example because I didn’t want to have a book of just those stories, but -

MARTIN ANDELMAN: I could send you 300.

NEIL BAROFSKY: But absolutely. But I think part of the problem, and we talked about this before, is that these stories, they don’t resonate in Washington. These people, these officials, these multimillionaires often are who they are who come to these jobs – you know, they’re not having, they don’t – it isn’t their good friends who are going through the foreclosure process. You know, they live in this sort of very tight elite and they don’t have the empathy that normal people get when they interact with folks who know people who’ve been through this process, who’ve been chewed up by the economic system and spit out and left hopeless and homeless.

And I think that’s also part of the problem is that they live in this bubble where the concerns of so many Americans just aren’t real. And they can cheer this, you know, so-called recovery and congratulate themselves on the 800,000 or so homeowners who actually still are in permanent HAMP modifications and consider that a success because they don’t interact or really have an understanding perhaps of what’s going on with the millions and millions who continue to suffer, who could have been helped and weren’t helped. Or, as others suggest, they’re just a bunch of sociopaths who are incapable of empathy, which can see would make a difference, but I think that’s all part of it.

MARTIN ANDELMAN: Yeah, I know. Now, and look what’s happening in California…

Private right of action / legal aid

37:42 MARTIN ANDELMAN: Look what’s happening in California. You know, the pendulum has started to swing. And I’ve written about this Homeowner Bill of Rights that Attorney General Harris has – she really did a great job, she got passed. I was shocked. California is a very bank-friendly state, you know, and we’ve got Wells Fargo and BofA in San Francisco, an hour away from Sacramento there. You know, we’ve got a lot of lobbying. It’s been here a long – the subprime industry was born here. I mean I guess we’ve got a lot of lobbying power here. But she got this Bill of Rights passed. And so now, the settlement, the terms of the DOJ settlement, are now codified, they’re now state law, or they will be on January 1. So you’d think that’s a good thing. And homeowners can hire an attorney to help them negotiate with banks, or there’s even a private right of action, which is what I’ve been waiting for forever, is to say, look, when HAMP came out and they weren’t following the guidelines and then people tried to sue, and they said, “Well, you have no private right of action.” That’s when I learned that phrase. That phrase drives me insane. It’s like you’re allowed to have a law but if there’s no private right of action you can’t sue if the law’s broken. I mean, aiy. All right, so no private right of action. Now there is a private right of action. Except in California now we have a fight going because the California State Bar says that lawyers can’t be paid to help someone with a loan modification until some nebulous time, I don’t know when, in the future that nobody, no lawyers will work under. So now we have a law that says, “Look, you can hire a lawyer to help with this, but you can’t pay them. What’s going – does that mean? I mean -

NEIL BAROFSKY: Well, as I say, you know, it’s much like the HAMP rules. And there are plenty of rules in HAMP, but rules are only as good and only effective as there is a willingness and mechanisms to enforce those rules. And you know in the HAMP program, the Treasury Department had absolutely no willingness whatsoever to hold these institutions to the letter of the rules and allowed them to ignore those rules with impunity, and ultimately when the big multi-state mortgage settlement came, they actually paid them to violate the rules with impunity.

So, you know, that’s the problem with any of these fixes is that unless you have a cop on the beat who’s going to enforce those rules and is willing to stand up to the political pressures and the economic pressures of tangling with these extremely dangerous Frankenstein monsters that continue to roam this country, in the big banks, it’s just going to be words on paper, and it’s not going to have that impact. And look, they have a lot of different ways to flex their muscle, and you know I’m sure there are actually some people in Washington who actually believe that passing the Dodd-Frank regulatory reform would do something to end Too Big To Fail. Perhaps, but it would have to be those who have such a level of naiveté to not understand that if you don’t do something up front in a very clear and obliterating manner, you put the – the advantage goes back to the banks, in implementation, in rule formation, through their lobbyists, through their power flexing their economic muscle. So hopefully we won’t see that in California, and I’m not totally familiar with the details of what you’re describing, but it sounds like that process has perhaps begun. And so passing legislation is only a very early step. It’s what happens afterwards that’s going to control.

MARTIN ANDELMAN: Well, and where are the trial attorneys? Where are the lawyers that are there to fight for the underdog against big banking? You know, where are the trial lawyers? Well, if there’s a private right of action and there’s a provision for attorneys’ fees, maybe we’ll see them, you know, enter the game.

NEIL BAROFSKY: Instead you have very underfunded legal aid lawyers who do remarkable work and are just the true, you know, the true unsung heroes of this foreclosure crisis, who, you know, who fight these sort of hopeless battles relentlessly day after day and it’s sort of with a courage and – you know, any of these guys or women could easily jump to a law firm and make 15 times their salary the next day. So they’re there, but the problem is that there’s just not enough of them.

You know, one of the things, as state budgets continue to get slashed in this sort of misguided drive towards austerity, you know legal aid is always one of the things to get cut. They’re underfunded, overworked, and you know it’s one of those things. And you know it was really one of those dark moments in HAMP, when, or in the mortgage modification program, when Geithner and company blocked TARP money to be going to legal aid.

MARTIN ANDELMAN: For legal aid, right.

NEIL BAROFSKY: And that sort of – again, if you think of it as a program that’s designed to help four million homeowners, that doesn’t make sense, but if you think of it as a program that’s really about foaming the runway for the banks, then of course they’re going to block funding for anything that could potentially throw any roadblocks for the banks in their relentless pursuit of profit.

MARTIN ANDELMAN: Yeah, I wrote about that at the time of course and said, you know, that it seems that legal aid is the only thing that TARP funds can’t be used for. I mean, the banks can do whatever else they want with them but, no, we can’t use them for legal aid, there’s some rule about that. I mean, just another craziness thing. Like, you would expect millions of people to scream at the same time, “What?!”


What should people do? Voting and the long game

45:45 MARTIN ANDELMAN: What should – if you were to give people – I mean, what should people do? What should my readers do? What should – people are always asking me, you know, what’s the answer to this? And I try to help, in whatever ways I can, help people save homes, if I can do that, by putting pressure on a bank or by working with a bank or whatever, fine. But it’s not a national solution. Elizabeth Warren says there’s no federal answer, it’s a state-by-state kind of battle. I mean, is this a – is this a – the pain’s going to just have to get bad enough and people are just going to have to get more politically active and demand different leaders, different change? I mean, is that it? I mean, are we resigned to more of the same going forward?

NEIL BAROFSKY: We have to stop casting our votes for politicians who are going to maintain a broken status quo. And, you know, to me that’s where we have to be. And you know I think we have to recognize that this is perhaps the most important economic issue facing our country and resist the temptation to go with the lesser of two evils and hold my nose and vote for this candidate because he’s better than the other guy, because when we do that, you know the politicians don’t see our votes as lesser-of-two-evil votes or holding-our-nose votes, they see it as an affirmation of their policies. So when you vote for politicians who’ve done policies who you find and I find to be repugnant, of betrayal of their oaths of office to serve the taxpayer and the American people, we’ve got to stop reelecting these people. And we’ve got to withhold our votes to those candidates who are going to advocate the type of necessary change.

So, you know, if you’re in Massachusetts, you’ve got Elizabeth Warren who’s talking about breaking up the big banks. If I lived there, I’d vote for her. And there’s a lot of candidates running for Congress and the House of Representatives this year and candidates in the Senate who are advocating these positions, and so the number one thing you could do is to vote for one of those and demand that the politicians get it right next time. Because, you know, this is a growing movement of breaking up the banks, and you know you break that corrupting influence and I really do believe a lot of good will flow in the future for this country. And, you know, taking that type of political action is, to me, is going to be necessary. It’s not going to happen — it’s certainly not going to happen in 2012.

MARTIN ANDELMAN: Heh. I was going to say, well who do you vote for? That’s what I mean. I mean I know lots of people that are saying, “Well, I’m not voting.” And, “Would it matter if I did? I mean, it’s the same thing, right?”

NEIL BAROFSKY: Well I think people should vote. If people are disgusted with the two candidates, they should vote third party. They should write someone in. Because I think that’s an important message, they should still vote. Because that’s – I mean, I think that’s part of the important message we have to send to Washington, which is that because – I mean, that’s part of the problem, right? If you don’t vote at all, then you’re sending a message to Washington that you don’t care, you’re not involved, you’re not engaged. And what we have to do is we’ve got to convince the politicians in Washington that there is a force, there’s a number of people out there who are really angry and want a third choice, want to do something else, and that’s how we can put pressure. Maybe if we scare them enough that enough votes show up not for one or the other, that that could help move one or the other political party to the right direction, or maybe even, if we’re really lucky, give birth to a third party movement. But I think if you stay home and don’t vote at all, you just disappear from the radar screen.

MARTIN ANDELMAN: Yeah. I think that’s right. And I’m certainly going to do all I can in that regard and try to get a list of the politicians that are in that camp and write more about them and talk more about them, get people to be more aware of them. They’re not going to hear about them on cable news. I mean, that’s just not – they don’t cover anything anymore.

I’m in the fight because of a daughter. Have you reached that point yet, where you realize, you know, you have a child. I mean, we have to win this. I mean, this has to get better.

NEIL BAROFSKY: I do. But I have to tell you, Martin, in my darkest corners of my soul, I – you know, and I will do everything I can, and I wrote this book, and I will continue to advocate for change before the next crisis hits – but I have to confess that I think that the power and the entrenched interests are so strong that it’s going to take another crisis. And part of what I believe is a strategy is to educate people and through this book have people understand that that intuitive feeling that they have that their government is betraying them, that it doesn’t matter who’s in office, that their interests, your interests, my interests, are always going to be secondary to the corporate interests, is in part so that when that next crisis hits, and I think it’s going to be a doozy, as we stop, as we rebuild, that these ideas, that these senses, never again is the operative political dialogue. We had a real chance in 2008, and we had a real, real good chance in 2010, and we cane awfully close. But Secretary Geithner and the Obama administration went to war against those who were trying to break up the banks. But we came awfully close before, and it’s my hope that we can do it again before the next crisis hits so we can prevent it from happening and being as devastating as it will. But if not, you know, we’ve got to be in it for the long game.

juliania September 26th, 2012 at 8:20 am

Thank you very much, thatvisionthing! And to FDL for keeping this important thread open.

thatvisionthing September 26th, 2012 at 11:42 am
In response to juliania @ 196

Thanks Juliana — I’m grateful too for your comment @193 above mine — I took it for granted that Simon Johnson’s doomsday cycle was essentially correct, but you’re right, I went to look and the commenters on Naked Capitalism raised some good arguments. I wish Neil Barofsky would come back to address that. I’m harking to Mauimom’s question @68 — what if we didn’t bail them out — and Barofsky’s reply @104 too — doesn’t matter, they think we will, and we will. And you get the boom-bust-bailout doomsday cycle going.

Here’s my thing. If it’s a cycle, then it’s functional. It keeps going around and around, an ecology. So a doomsday cycle is a contradiction in terms. It never ends, and crashing is a necessary step. Maybe it’s the same thing as Naomi Klein’s Shock Doctrine. I wish I was up to reading whole books. I feel like a bee skipping from book flower to book flower. Hope some pollination happens because I never grok the whole things.

The thing that I don’t think Johnson and hence Barofsky are taking into account that I see (doesn’t mean I’m seeing right) is how the banksters make it all up as they go. There’s nothing really real, it’s just what they decided was the reality we’re all going to have to deal with. There’s no law that matters, they’ll make up what they want after the fact. The more codependents they force on board, the more power for them. It probably doesn’t matter who we elect because they’re just sock puppets for the Wizards of Oz. So the terrible consequences if Citibank crashed? I’m not convinced. Either they’ll make up something else, or they want the crash, or if at last there’s a crash that’s too real for them to fuck away then hurray we’ve hit reality again and real people can begin to grab on and do real things and at last we get real. As long as we’re just actors in their dreams, that doesn’t happen. Does that make sense?

thatvisionthing September 28th, 2012 at 11:10 am

Doom loop as downward spiral; Noam Chomsky:

Concentration of wealth yields concentration of political power. And concentration of political power gives rise to legislation that increases and accelerates the cycle. The legislation, essentially bipartisan, drives new fiscal policies and tax changes, as well as the rules of corporate governance and deregulation. Alongside this began a sharp rise in the costs of elections, which drove the political parties even deeper into the pockets of the corporate sector.

(Law of riches: The rich get richer.)

thatvisionthing September 28th, 2012 at 11:38 am

Downward spiral as Goldman Sachs; Matt Taibbi:

What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain

– an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.

The bank’s unprecedented reach and power have enabled it to turn all of America into a giant pump-and-dump scam… All that money that you’re losing, it’s going somewhere, and in both a literal and a figurative sense, Goldman Sachs is where it’s going. The bank is a huge, highly sophisticated engine for converting the useful, deployed wealth of society into the least useful, most wasteful and insoluble substance on Earth – pure profit for rich individuals.

The basic idea isn’t hard to follow. You take a dollar and borrow nine against it; then you take that $10 fund and borrow $90; then you take your $100 fund and, so long as the public is still lending, borrow and invest $900. If the last fund in the line starts to lose value, you no longer have the money to pay back your investors, and everyone gets massacred.

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