Tarp investigator seeks evidence of banks "cooking their books"

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cat233's picture
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Tarp investigator seeks evidence of banks "cooking their books"

From Financial Times

Tarp investigator seeks evidence of book fiddling
By Tom Braithwaite in Washington

Published: April 12 2009 23:32 | Last updated: April 12 2009 23:32

The official policing the $700bn Tarp fund says he is investigating whether banks have "cooked their books" to secure bail-out money.

Neil Barofsky, special inspector-general for the troubled asset relief programme, told the Financial Times he was seeking evidence of wrongdoing on the part of banks receiving help from the fund, which was designed to ease credit conditions and support distressed industries.

"I hope we don't find a single bank that's cooked their books to try to get money but I don't think that's going to be the case," said Mr Barofsky, who has been dubbed the "Tarp cop".

Just how banks value mortgage-backed securities and other assets on their books has been an issue of intense debate as the financial crisis has unfolded.

Compete article here: http://www.ft.com/cms/s/0/163c85c4-2789-11de-9b77-00144feabdc0.html?ncli...

joe2baba's picture
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Posts: 807
Re: Tarp investigator seeks evidence of banks "cooking ...


my faith in the system is restored ..............as if any of this matters............i have  a garden and a community i 'm all set

Ready's picture
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Re: Tarp investigator seeks evidence of banks "cooking ...


I didn't register to see the whole article, any mention of transparency or reporting on where the money actually went as part of this process?

I realize it is doubtful, but one can hope!


cat233's picture
Status: Platinum Member (Offline)
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Re: Tarp investigator seeks evidence of banks "cooking ...


I think to be hopeful is the best we have... This is probably just another ring in the circus.  I don't easily get upset, but when it comes to bailouts, I certainly do.


Mr Barofsky also said the Treasury’s expanded term asset-backed securities
loan facility (Talf) was ripe for fraud.

The former New York prosecutor said the decision to expand the Talf to
encourage investors to buy distressed, or “legacy”, assets from banks could put
public money behind investments that were backed by fraudulent mortgages.

“One of our strongest recommendations of the last report was do not expand
the Talf to buying legacy assets. If its structure is not changed considerably
it’s very, very dangerous,” he said.

“We know the triple A rating [ascribed to the securities by credit rating
agencies] was a sham. We could be buying securities that are backed with assets
that we know were likely riddled with fraud.”

Mr Barofsky revealed at a Congressional hearing earlier this month that he
was involved with “probably more than a dozen” investigations into possible
wrongdoing and fraud. He told the FT that potential fraudsters would pay
attention when his team began seeking indictments. “Indictments can serve as
great deterrents,” he said.

Mr Barofsky declined to detail what crimes institutions could have committed.
But securities fraud, wire fraud and false statement were all possible lines of
inquiry, he said.

In the first public allegation of Tarp fraud, the Securities and Exchange
Commission, with assistance from Mr Barofsky’s office, claimed in January that
ProTrust, a Nashville-based company, offered clients a fictitious opportunity to
invest in the government’s bail-out scheme.

With scant reporting requirements when the bail-outs began at the end of last
year, banks had a fairly free rein on what to do with Tarp money. Concerned
about a lack of transparency, Mr Barofsky has written to all of them to ask how
the funds were spent.

“We haven’t served a single subpoena,” he says. The preliminary audit will be
published in the next few weeks, after analysis of the “pretty detailed
descriptions with what banks say they’ve done with the money”.

That fulfils part of his office’s transparency remit and is not necessarily a
trawl for fraud. But big banks are potential targets.

The energetic – and potentially aggressive – approach to following the money
chimes with the belated rush to oversight in Congress and the outrage over how
legislation allowed $165m bonuses to be paid to executives at AIG, the
bailed-out insurance group.

“One of our main areas of focus [on executive compensation] is to see if
there was a significant communications breakdown as to how that policy decision
was made,” says Mr Barofsky.


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