When Neil Barofsky was handed the job of Special Inspector General of the TARP program, he assumed that his role was to be independent of Treasury, and vigilant against waste, fraud, and abuse. But in canvassing other inspectors general for guidance, he was told the best approach was to appear to be active, but not do anything that would make enemies. In other words, go along to get along.
According to Gretchen Morgenson's review of his book Bailout in today's New York Times, "Thus the collision course was set between Mr. Barofsky and a crew of complacent, bank-friendly Treasury officials" whose "natural stance was marching in lock-step with the banks."
"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," Barofsky told Morgenson in an interview last week. "It really happened. These suspicions are valid."
Among Barofsky's statements in the interview were:
* "There has to be wide-scale acknowledgment that regulatory capture exists, dominates our system and needs to be eradicated."
* "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. 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 much of what's wrong with Dodd-Frank is it trusts the regulators to be completely immune to the corrupting influences of the banks. 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."
* "Incentives are baked into the system to take advantage of it for short-term profit. The incentives are to cheat, and cheating is profitable because there are no consequences."
* "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."