The AIG backdoor-bailout story continues to build, with the TARP special inspector general now re-opening an investigation into the matter.
Emphasis on “re-opening.” The SIGTARP, Neil Barofsky, released a report in November on this very thing. You’d think The Wall Street Journal and New York Times would remember that since they had major stories on it (the Times at least references the report). That’s important because that first iteration wasn’t exactly an aggressive document, and the proof’s in all the AIG/Fed/Goldman news that’s since broken.
It ought to be an embarrassment for Barofsky to have to revisit this so soon, but you wouldn’t get that from the Journal or Times—particularly the Times, which drops a little too much sugar in this beat-sweetener for my taste. Here’s the second and third paragraphs of its story:
But increasingly, Mr. Barofsky is setting off fireworks on Capitol Hill as he quietly and methodically pieces together the most complete historical record yet of the financial bailout. His reports are careful but not cautious, showing a willingness to stand up to some of the most powerful people and institutions in Washington or on Wall Street.
“Neil is not afraid to just follow things where they lead,” said Anthony S. Barkow, a friend and fellow former prosecutor in the United States attorney’s office for the Southern District of New York. “He is undeterred by having powerful people angry at him for doing what he does.”
Neil also loves puppies, volunteers at the homeless shelter, and is a doting son.
The Times already gets Barofsky’s office to leak
it a little scoop (The AP was actually up first with this last night):
On Wednesday, Mr. Barofsky will be one of several top officials to answer questions before a Congressional panel on how the government handled the bailout of A.I.G. Mr. Barofsky will cite contradictions in the Treasury’s public statements about the bailout, according to an excerpt from his written testimony obtained by The New York Times.
The Treasury issued a statement this month that “taxpayers will be made whole” on certain investments in A.I.G., but its own analysis has estimated that the Treasury will lose $30 billion on the same investments, according to the prepared testimony.
So, the Treasury says publicly it will break even on investments it internally thinks will lose $30 billion? That ought to be interesting testimony.
Maybe Barofsky has learned his lesson from his November report. He’s certainly talking tough in the Times:
When he arrived in Washington, he said he was shocked to find how much money was flying out the door, with so few controls.
In one conference call, he said, he asked what safeguards would be built into a new program to help investors buy banks’ impaired assets.
“They said, ‘Rating agencies and investor due diligence,’ and my jaw just dropped,” he said. “They said, ‘Yes, the ratings agencies will not be embarrassed again.’ I can’t tell you how often I heard the phrase, ‘reputational risk.’ ‘Oh, the banks wouldn’t do that.’ This is trying to shame the shameless.”
The Fed and Treasury have grown more receptive to his ideas, he said. And his office has also grown. It now has a branch in New York, and there are plans for two more in California.
“We’re following the TARP crimes,” he said.
Let’s hope the press can show it has a better attention span going forward.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at firstname.lastname@example.org. Follow him on Twitter at @ryanchittum.