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April 27th, 2009

Has TARP Gone Completely Criminal?



Last Tuesday we wrote that Federal Investigators announced that 20 criminal probes have been launched to investigate possible securities fraud, tax issues, public corruption, insider trading, mortgage-mod fraud, and other crimes associated with the TARP. By the weeks end, accusations into TARP’s “criminal” element grew even stronger — possibly even encompassing those pointing the finger.

New York Attorney General Andrew Cuomo informed Congress last week that Bank of America’s (BofA) coerced acquisition of Merrill Lynch on the part of former Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke amounts to securities fraud. Cuomo suggests that the Federal officials mandated that BofA’s top executive Ken Lewis not disclose Merrill’s massive fourth quarter losses to investors prior to the merger which proved to be a financial disaster.

Yet, Donald Luskin, contributing ditor at National Review Online, says Cuomo himself may have stepped outside the lines. Luskin writes that “Cuomo may have significantly misrepresented Lewis’s testimony by claiming that he [Lewis] ‘would have’ disclosed the Merrill loss “but for the intervention of the Treasury Department.”” But if you read Lewis’ deposition, according to Luskin, it supports the Treasury’s claims that the lack of public disclosure referred to the acceptance of TARP funds, not Merrill’s losses. “If true,” writes Luskin, “this is serious prosecutorial misconduct.”

When TARP’s Inspector General Neil Barofsky presented his 247-page report to Congress last Tuesday, he warned that “the total fraud could ultimately reach into the tens of billions of dollars.” Barofsky said he is currently “auditing” several reports, as well as federal “decision making.”

Whether Cuomo’s controversial claims amount to public corruption, the Treasury’s coercion of the original nine banks to accept money was justified, and so on, has yet to be proven. One thing’s for sure, as Luskin puts it, such a massive pot of money attracts public and private corruption “like fleas to a dog. A $700 billion budget buys one heck of a big dog — apparently a dog that attracts some pretty big fleas.”

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2 Responses to “Has TARP Gone Completely Criminal?”

  1. Stevie Nichts Says: May 2nd, 2009 at 11:25 am

    Here is a blog post that cites a number of additional sources titled It’s official. TARP is just theft. It includes a link to a Robert Scheer article in The Nation.

    “We are being robbed big-time, but you can’t say we haven’t been warned. Not after the release Tuesday of a scathing report by the Treasury Department’s special inspector general, who charged that the aptly named Troubled Asset Relief Fund bailout program is rife with mismanagement and potential for fraud. The IG’s office already has opened twenty criminal fraud investigations into the $700 billion program, which is now well on its way to a $3 trillion obligation, and the IG predicts many more are coming.”

    This is OUR money, so we really should care!

  2. Tim Manni Says: May 4th, 2009 at 11:41 am


    Good to hear from you. We completely agree — it’s our money and we should care, we need to care! I don’t think the threat of fraud really surprised too many people when you consider the scope and mass of the program. A $700 billion program has a massive potential for fraud.

    I’ll definitely check out that blog post, thanks. Perhaps we can find solace in the disclosure…at least the gov is telling us about the fraud, not trying to hide it.

    Thanks for commenting, hope to hear from you again soon,

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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