Barofsky Says Criminal Charges Possible in Alleged AIG Coverup

Neil Barofsky was appointed to the position of 'Special Investigator General' of Tarp (SIGTARP). He isn't exactly a Special Prosecutor, but according to the link below he does have many of the powers of a Special Prosecutor.

SIGTARP has more than 40 agents, including former Secret Service, Federal Bureau of Investigation and Internal Revenue Service investigators, who sport blue windbreakers emblazoned with the SIGTARP seal.

They are authorized by Congress to carry guns -- Barofsky does not -- make arrests, and subpoena and seize records.

He has been pretty low-key so far, unlike other well-known Special Prosecutors like Kenneth Starr eg. as he goes about his job of over-seeing the management of TARP funds. He is a Democrat, but has worked under both Republican and Democratic administrations. His style reminds me of Eliott Spitzer. And like Spitzer, he is not very popular on Wall St. these days, something he says doesn't bother him in the least.



This past week he issued a report that cannot have been very good news, especially for the Treasury Department.

From the article that appeared in Bloomberg this week which is well worth reading in its entirety:

Barofsky Says Criminal Charges Possible in Alleged AIG Coverup

Barofsky’s most recent broadside came on April 20, when a SIGTARP report labeled a housing-loan modification program funded with $50 billion of TARP money as ineffectual.

230,000 Homeowners

Treasury spokesman Andrew Williams counters that the program has resulted in modifications for more than 230,000 homeowners.

The TARP watchdog has also criticized Treasury Secretary Timothy F. Geithner in reports and in congressional testimony for his handling of the process by which insurance giant American International Group Inc. was saved from insolvency in 2008, when Geithner was head of the Federal Reserve Bank of New York.

The secrecy that enveloped the deal was unwarranted, Barofsky says, adding that his probe of an alleged New York Fed coverup in the AIG case could result in criminal or civil charges.

In Senate Finance Committee testimony on April 20, Barofsky said SIGTARP would investigate seven AIG-linked mortgage-related securities similar to Abacus 2007-AC1, the instrument underwritten by Goldman Sachs Group Inc. that is at the center of a U.S. Securities and Exchange Commission lawsuit filed against the investment bank on April 16.

Barofsky and Geithner have had a contentious relationship with Geithner demanding that Barofsky report directly to him. Barofsky refused stating that he reports only to the President.

“This Treasury Department and the previous Treasury Department bear some of the responsibility for not being straightforward with the American people.”

Barofsky criticized Geithner’s predecessor, Paulson, in an October 2009 report, saying Paulson publicly described the initial nine TARP bank recipients as healthy when he knew that at least one of them risked failure.

In a letter responding to Barofsky, Assistant Treasury Secretary Herbert Allison wrote: “Any review of such announcements must be considered in light of the unprecedented circumstances in which they were made.”

Geithner and Paulson both declined to comment for this story.

Asked whether or not Geithner himself is a target of his investigation he responded:

He won’t say whether the investigation is targeting Geithner personally.

In a statement, the New York Fed said: “Allegations that the New York Fed engaged in a coverup of its intervention in AIG are not true. The New York Fed has fully cooperated with the Special Inspector General.”

Barofsky’s to-do list grows. SIGTARP now has 120 employees, has initiated 20 audits and was involved with 84 investigations as of March 31. In January, it opened a New York office, with San Francisco and Los Angeles branches scheduled for later this year.

Barofsky does say that the question of whether the New York Fed engaged in a coverup will result in some sort of action.

“We’re either going to have criminal or civil charges against individuals or we’re going to have a report,” Barofsky says. “This is too important for us not to share our findings.”

Maybe Henry Paulson and all those who thought they did not have to answer to anyone, will finally have to answer some questions after all.

AIG Cover-Up: SIGTARP Barofsky Hints At Criminal Charges Against The New York Fed

http://dailybail.com/home/aig-cover-up-sigtarp-barofsky-hints-at-criminal-charges-agai.html

Bloomberg link:
http://preview.bloomberg.com/news/2010-04-28/barofsky-says-criminal-or-civil-charges-possible-in-alleged-aig-coverup.html

That's what is needed. He seems like just the person to go after these Wall St. criminals.

From your link:

Barofsky has a history of fearless prosecution. He was the target of a kidnapping/assassination attempt by Colombian druglords in 2005 -- detailed in the Bloomberg story. So if he's got a case against either, he will probably file. That said, insider trading charges against Friedman would normally be an SEC investigation. Maybe that's why he said the following to Bloomberg:

“I’ve been in contact with the SEC,” he told the committee. “We’re going to coordinate with them, but we’re going to lead the charge. We’re going to review these transactions.”

Paulson demanded no oversight of what they would do with the TARP funds. Now we are finding out why. Even after they were bailed out, it looks like Barofsky has uncovered some mis-use of the bail-out funds. The arrogance is beyond belief and the sense of 'we are untouchable'.

Who can forget all this?

Tim Geithner: Talk To The Hand

http://nymag.com/daily/intel/2010/01/tim_geithner_talk_to_the_hand.html

(and a perfect pic to go with the transcript)

And contemptuousness. The emblematic kind you just can't exaggerate when it came to Bush Cheney Rumsfeld Paulson.

I've been reading that Geithner's predecessor and his pals housed the SIGTARP offices in the fetid basement of the Treasury where there was a backed up sewage problem. There's a great little writeup about that here:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x532657

And a great closing punch line:

"No comment from the former Treasury secretary, but we sure bet he regrets putting this guy in the basement."

HAAA . The irony is too rich and poetic for words. I can't tell you how much I am loving this.

exchange. He wasn't happy when she brought up the fact that the Federal Reserve is run by Bankers, and that he was not elected by the public, but by bankers. Don't know why he was so sensitive about that, except the use of the word 'Federal' in that context was meant to confuse, and does, many people.

They don't like it when the 'little people' start to lift the cover off their privileged, secret world of money and influence.

From the Bloomberg link:

Culture of Secrecy

He (Barofscky) offers the AIG bailout as an example. For more than a year, the New York Fed kept key aspects of the AIG bailout secret, including details of its own involvement and its decision to have AIG pay the insurer’s bank counterparties 100 cents on the dollar on the credit protection they’d bought against about $62 billion in CDOs.

Barofsky thinks that all this secrecy was a very bad thing. I agree. Who DO they think they are?

Lol, I read that, it's in the OP btw from the Bloomberg article, about how they put him in the basement which ended up having a very bad odor. I guess they thought they could dismiss him also. So far, it didn't work out that way.

I just hope we are not disappointed, and that this guy is the real thing. I wonder why Paulson et al even allowed him to be appointed in the first place? I'd love to know how that happened since King Henry was so emphatic about 'no oversight'.

Fingers crossed, but it looks like the SEC has referred the Goldman Sachs case to the DOJ. So, maybe someone will be held accountable for the massive crimes that were committed against this country. I just hope they just scapegoat a few lower level people to calm the people down.

It's hard to overlook the fact that Bush, the same guy who gave us Paulson, drafted him and it really makes you wonder why. More to the point, it makes me wonder what he was working on-- he was allegedly 3 1/2 years into an investigation on something else "very complicated" when Bush pulled him off that for this appointment, and apparently the Bush/Treasury assumption was that he would take to being a ready subordinate.




http://www.nytimes.com/2010/01/26/business/26tarp.html?pagewanted=2

some fears that this could be a way to clean up a mess while scape-goating a few lower-level people, using someone they government can rely on not to go 'too far'. And yes, it is good to remember that he was drafted by Bush. I wonder if the 3 year investigation was the Colombia drug investigation? Will have to do some research on this.

I do remember right after the bail-out thinking that Congress had gone along with the 'no oversight' demands by Paulson. So I was surprised to discover this guy on the job, armed not only with subpoena power, but with weapons.

Do you have any idea who suggested him? It doesn't seem to have made Geithner happy and I wonder how Obama feels about him? It had to be Congress but I don't remember it to be honest.

I'd love to think it was for real, that this time they really are going after the bad guys but I am cautious about getting too excited until it actually happens.

He was nominated by Bush as you pointed out in Nov. 2008. Baucus, who was against the bailouts, wanted an Inspector General before voting for them. So, he was basically responsible for getting an agreement to appoint someone, and said he would act fast to 'vet Barofsky'.

Claire McCaskill wanted to give more power to the office of SIGTARP, and from I can see, she succeeded.

The office answers to Congress and the President. Geithner tried to change that and make answerable to Treasury. He lost that fight.

Oddly his confirmation depended on a panel that included people he would be investigating with no one who would be protected by the office.

Here is a link to his confirmation. Still looking to find out who supported him etc.

Senate Confirms N.Y. Prosecutor As Inspector General for Bailout

it took two months from the time the Treasury Department started spending the $700 billion before the special IG's job was filled.

The Bush administration acted immediately to appoint the rest of the bailout team, but it waited six weeks to nominate Barofsky as special inspector general. Then, his confirmation was held up anonymously by one senator. The opposition was finally lifted last week.

The delay indicated a continued ambivalence toward inspectors general

He seems to be doing a good job so far. I wish Obama had not kept Geithner around as he appears to have tried hard to prevent this oversight. Another article I read stated that the appointment IS a political appointment, and that SIGs have a hard time going against the administration that appointed them. Still, he was not on Obama's list of people to let go during the transition period.

Will keep trying to find out more about him as I would hate this to turn out like so many other 'investigations' that ended up with just a few scapegoats, in this case it looks like 'Fabulous Fab(rice)' from Goldman Sachs.

interesting. I do like it that he's a Democrat and open about that. Which just adds to to my curiosity about Bush's motives at the end, since he was so very partisanly conservative and imperial in his picks, and (most often) got his choices rubberstamped through. He probably could have gotten away with a surer bet of his own..

I can't guess what Pres Obama makes of him, since he rather publicly has Geithner in his gunsight, but I think Obama's pick of Earl Devaney for the Stim czar signaled that he wanted a real watchdog with a real reputation, for that end of things, at least. (Which, brings me to the recollection that eventually there can be same occasional fruits and justice (Abramoff, Cunningham) despite long odds.)

I wonder who the "one senator" was that tried to have his (Barofsky's) appointment held up?

Thanks again for all your fact finding above and a great OP.

as I was not aware of who Barofsky was or all the drama that has apparently gone on between him and Tim Geithner, and Paulson.

I'm definitely with you on being curious about Bush appointing him. It doesn't seem to fit at all. It WAS at the end of his presidency. Trying to figure a reason why he would appoint someone who by all accounts was bound to go after people like Geithner, especially regarding his involvement in AIG, and Henry Paulson.

It could be that they expected to keep him in the basement. Don't know how Geithner was viewed by Bush.

And of course, it may just be one of those flukes where Bush liked the guy because of his time working on the 'drug war' and didn't really think about it.

We are not alone. Others seem surprised by Bush's choice also, but pleasantly so:

http://dailybail.com/home/gwb-did-something-right-meet-your-new-best-friend-neil-barof.html



GWB Did Something Right: Meet Your New Best Friend Neil Barofsky

Give GW some credit; he got one right. Appointing a prosecutor to a regulatory oversight function is usually going to mean a lot of audits. Egggsssaaaactly. Neil Barofsky is the Treasury's Special Inspector General of TARP appointed by George W. Bush to serve several watchdog functions. Barofsky works in concert with Elizabeth Warren but operates independently of her congressionally appointed commission.

I'm still endeavoring to determine what kind of actual power Barofsky wields with his charter at Treasury. (He works in the same building as Geithner. The enemy within.) Odds say he is ultimately toothless not unlike Elizabeth Warren and the panel she chairs, but it does not preclude him from making some noise occasionally. And he did today.

Elizabeth Warren! I always feel better when I see that she is around, and it's definitely good to see that she may be working with him. This makes me feel a lot better, but deepens the mystery of Bush being the one to appoint him.

nomination. I found this:

In addition, Congress created an inspector general's office to oversee the program, but the confirmation of veteran federal prosecutor Neil Barofsky to that job post has been blocked in the Senate by a senator who remains anonymous under Senate practice.

Obama: Financial bailout must help homeowners, too

"This report proves the immediate need for oversight of the taxpayer dollars being expended right now as part of TARP," Senate Finance Committee Chairman Max Baucus, D-Mont., said. "Because of one senator's anonymous block on this nomination, three weeks have been lost — a key element of the TARP oversight program is not in place."

Republican Sen. Jim Bunning of Kentucky, a member of the Senate Banking Committee who opposed the bailout bill, has said he had "serious concerns" with Barofsky's nomination, though he has praised his experience. Bunning spokesman Mike Reynard would not comment on whether Bunning had placed the hold on the nomination.

I don't know if Bunning is the one, but I've seen him mentioned a few times. Interesting that Baucus really wanted this oversight. But so did Clair McCaskill and Barney Frank eg. And it seems it was members of Congress who created the position and insisted over the Paulson demands of no oversight, that there would have to be some. Maybe they were just doing their duty for once?

Treasury, Geithner et al and especially Paulson, did NOT want to help home-owners as Obama wanted.

And they did not. Only a very small % of home-owners were helped. And THAT is one of the issues raised by Barofsky (see article in the OP) He is very focused on that failure, which is clearly deliberate. They seem have flaunted Obama's request. But Giethner is close to Obama so the question arises 'how much power does Obama have'?

Anyhow, it is possible that they underestimated Barofsky when they put him in the basement. He really is not happy with Geithner trying to cover up his dealings with AIG. That just won't go away and I wonder how Obama feels about that. And if he can influence Barofsky if he doesn't want Geithner held accountable. I hope not.

as a primer. Many knowledgeable people here.