In this case, it would be the tale.
For years, we have been chronicling the goings-on and happenstances of Bailout Nation and particularly that of TARP, the Troubled Assets Relief Plan. As long as tax-payers continue to bail out moneyed interests that should be allowed to sink or swim on their own, we will continue to do so but this post feels like a culmination of sorts.
The man charged with overseeing the Troubled Asset Relief Program (TARP) as its Special Inspector General, Neil Barofsky, is coming out with a new book, "Bailout" which tells the story of his time serving in that capacity. TARP, initiated under President Bush was effectively the Wall Street bailout that was continued under the current administration and expanded far beyond its original scope to include everything from the Chrysler and GM bailouts to underwater home loan bailouts.
We have excerpted portions of an interview he did with the New York Times in advance of his book release.
As Mr. Barofsky writes, he had assumed that his assignment to oversee TARP meant that he should be fiercely independent from the Treasury Department, and vigilant against waste, fraud and abuse. But after canvassing other inspector generals for guidance, he writes, he learned of different priorities: maintaining and possibly increasing budgets, appearing to be active - and not making enemies.
"The common refrain went like this," Mr. Barofsky writes. "There are three different types of I.G.'s. You can be a lap dog, a watchdog or a junkyard dog." A lap dog is seen as too timid, he was told. But being a junkyard dog was also ill-advised.
"What you want to be is a watchdog," he continues. "The agency should perceive you as a constructive but independent partner, helping to make things better for the agency, so everyone is better off." He also learned, he says, that success as an inspector general meant that investigations come second. Don't second-guess the Treasury. Instead, "focus on process."
Thus the collision course was set between Mr. Barofsky and a crew of complacent, bank-friendly Treasury officials. He soon discovered that the department's natural stance of marching in lock step with the banks meant that he had to question its policies and programs repeatedly to ensure that taxpayers weren't at risk for fraud and abuse.
"The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true," Mr. Barofsky said in an interview last week. "It really happened. These suspicions are valid."
The failure of the underwater home loan bailout or HAMP (Home Affordable Modification Program) is explained as such:
Another skirmish involved the department's ill-conceived loan modification plan, known as the Home Affordable Modification Program. When the Treasury began discussing the program's outlines, Mr. Barofsky said he became concerned that it would open the door to fraudulent foreclosure rescue schemes, in which large upfront fees could be extracted from desperate borrowers eager to participate in what was supposed to be a free government program. When his office recommended fraud-prevention measures, several were ignored, he writes.
A few months after the modification plan was announced, his office began a preliminary audit of its rollout. "We soon verified what we had suspected," Mr. Barofsky writes. "Treasury had failed to ensure that the servicers had the necessary infrastructure to support a massive mortgage modification program." It barely got off the ground, and few homeowners have received the help they hoped for.
Barofsky explains that the Treasury Department/Wall Street relationship is the very epitome of regulatory capture whereby the regulatory nature of the department is gamed exclusively to favor the Wall Street financial firms and has become so self-serving that in Barofsky's words Washington had abandoned Main Street while rescuing Wall Street.
So, what's to be done to change the culture - to change the way the actual regulators do their jobs?
"We need to re-educate our regulators that it's O.K. to be adversarial, that it's not going to hurt your career advancement to be more skeptical and more challenging," he said. "It's implicit in so much of the regulatory structure that if you don't make too many waves there will be a job for you elsewhere. So we have to limit those job opportunities and develop a more professional path for regulators as a career. That way, they won't always have that siren call of Wall Street."
Barofsky doesn't expect any help to come from the Dodd-Frank law:
"So much of what's wrong with Dodd-Frank is it trusts the regulators to be completely immune to the corrupting influences of the banks," he said in the interview. "That's so unrealistic. Congress has to take a meat cleaver to these banks and not trust regulators to do the job with a scalpel."
And finally, because the system is rigged towards making sure Wall Street has a soft landing no matter what their transgressions, Barofsky sees the situation as ripe for another financial collapse.
Mr. Barofsky joins the ranks of those who believe that another crisis is likely because of the failed response to this one. "Incentives are baked into the system to take advantage of it for short-term profit," he said. "The incentives are to cheat, and cheating is profitable because there are no consequences."
Despite all of this, Mr. Barofsky ends on something of a positive note. Meaningful changes to our broken system may finally come about, he writes, if enough people get angry. His conclusion is this: "Only with this appropriate and justified rage can we sow the seeds for the types of reform that will one day break our system free from the corrupting grasp of the megabanks."
Terrific. The most heavily regulated industry in the nation is set up to take another dive precisely because of the regulatory regime under which it operates and a law that was supposed to fix things but has every appearance of further entrenching the same problems that led us to the disastrous results of 2008.
That old definition of insanity would appear to apply here.