When 9-11 happened, New York City let out a bunch of no-bid emergency contracts to work on "the pile" at Ground Zero. The Commissioner of the NYC Department of Investigations, the late and great Ed Kurianksy, went to then Mayor Giuliani and insisted that since there was great chaos and confusion at Ground zero and money was just being thrown at the problem, there would be a huge opportunity for waste, fraud, and abuse. He demanded that each of the four prime contractors at Ground Zero take on an Independent Private Sector Inspector General (IPSIG), and the Mayor agreed.
Although it later turned out that there was some fraud at the level of second-, third-, and fourth-tier subcontractors (who did not have IPSISGs), the work of the prime contractors was closely monitored and abuses nipped in the bud and corrected. Many in the law enforcement and IG community thought that this would become a model for disaster relief.
So, when Katrina hit, some people from prominent IPSIG firms went to see Mike Chertoff over at Homeland Secuirty and said basically the same thing to him that Kuriansky has said to Giuliani–that since money will just be thrown at this problem, there is great potential for waste, fraud, and abuse. Chertoff told them that decisions about such things were going to be made by a lawyer in the Department, and sent them to go see that lawyer. He was Dick Cheney’s son-in-law. It should be no surprise to you that no IPSIGs were assigned to Katrina relief, and, as we all later learned, waste, fraud, and abuse was rampant, and ran to the billions of dollars.
When the financial crisis struck in the waning days of the Bush Administration (remember our economy suffered its heart attack in September and October of 2008, before Obama had even won the presidency), Hank Paulson proposed one as hoc, "throw money at the problem" proposal after another. Congress got ansty, thought that there might be a repeat of the Katrina misspent billions, and required the appointment of a Special Inspector General for TARP funds.
Thank goodness they did that. SIG TARP Neil Barofsky released a report this week which warns:
"The significant Government-financed leverage presents a great incentive for collusion between the buyer and seller of the asset, or the buyer and other buyers, whereby, once again, the taxpayer takes a significant loss while others profit," the office said in its quarterly report to Congress.
The Treasury should impose conflict-of-interest rules on firms participating in the program and disclose information about its beneficiaries, the report said.
I realize that identifying the possibility of collusion and calling for rulemaking is only a first step, but at least it is a first step.
Plus, he’s got 20 criminal fraud investigations open. Busy guy.
He’s not only looking back at past actions (as you do in all criminal cases, even those involving torture), he prospectively criticizing dumb moves before they happen:
The inspector general’s office said the Treasury should abolish its plan to have credit-ratings firms determine the quality of loans, and instead screen each residential mortgage-backed security it takes as collateral.
"Arguably, the wholesale failure of the credit-rating agencies to rate adequately such securities is at the heart of the securitization market collapse, if not the primary cause of the current credit crisis," the report said.
My thoughts exactly. Others may disagree, and feel free to educate me in the comments. . . .
I have no clue if this Barofsky guy is going to succeed, but he at least seems to "get it," to have a clue about what to look for.
By the way, he has a whistleblower hotline.
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Thanks for this catch, LHP! Please continue to follow up on this.
Is this work coordinated in any way with the watchdog appointed by Congress, which also seems to be doing excellent work, but which has been getting little cooperation from the Banksters? Sorry, I forget her name, but she seems to be a pretty sharp cookie backed up by good staff work.
And did you catch that pix that Rachel Maddow showed of the Big Meeting of the Banksters with President Obama? And how Dr. Maddow pointed out the slumbering Advisor Summers seated at the end of the table? Talk about “asleep at the wheel”– which sounds like a good nickname for Larry Summers. No wonder Harvard got rid of him.
Bob in HI
Credit-rating agencies should have no part of any recovery effort going forward. They are at the heart of our current catastrophe.
Thanks for this, LHP! Keep us posted. This sounds like someone whose back we could/should be watching.
Bob in HI, I think it’s Elizabeth Warren. And I agree, she’s damn good.
FunnyDiva
You know, i read Neil Barofsky and thought Hans Spakofsky(?). Isn’t he that fraud who Bush kept trying to appoint to the Federal Election Commission?
I kept thinking one dude was the other. You can imagine why i never expected anything to come of this…
Glad to hear the Universe is righting itself and i don’t have to be a perpetual cynic anymore.
Will these 20 “fraud investigations” bear fruit? Are they small fries? Or large fries being fried?
/shrug/
Yes, Elizabeth Warren’s the one. Thanks for the reminder.
Bob in HI
Not all investigations lead to indictment. Sometimes they lead to the conclusion that no crime has been committed. Sometimes they lead to the suspicion that a crime has been committed, but the conclusion that you do not have enough evidence for a prosecutable case.
What I like about the “20 investigations” is that unlike other people detailed from other parts of DOJ, and unlike some IG’s offices, and unlike OPR, Barofsky deems to be following the facts wherever they may lead instead of worrying about “not in my lane”
At the end of a given investigation, Barofsky may conclude that he does not have jurisdiction to prosecute something he has found, and can simply turn it over to some other part of DOJ or even to a State AG for prosecution.
It is the faucets wide open approach I am happy to see. Not even pursuing a lead because you have predetermined that it will not fall within your jurisdiction–except in really clear cut cases–is just an insidious form of predetermining the outcome (guilty or not guilty) of any investigation.
I am glad he seems to running down all of its leads.