TARP Special Inspector General Neil Barofsky: Office to be needed for ‘years’

As long as the government is paying out on the Troubled Asset Relief Program, TARP Special Inspector General Neil Barofsky says there will be a need to check fo...

By Suzanne Kubota
Senior Internet Editor

While the power of the SIGTARP has recently been at issue, Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, has no doubts about the staying power of the position. “(U)ltimately, even if the TARP’s buying authority sunsets at the end of the year,” Barofsky told the Federal Drive, “we’re still going to be around and the TARP is still going to be around.”

Barofsky talked with FederalNewsRadio about the future of various TARP programs, the return on investment, and the challenges his office faces enforcing the program.

Barofsky said because of its role to “ferret out waste, fraud and abuse”, the Special Inspector General’s office will be around “for many years to come.”

Earlier this month, the Treasury Department decided not to challenge the independence of Barofsky’s agency that Congress created to oversee spending of the $700 billion rescue package for the financial sector. With that “distraction” out of the way, Barofsky says his agency has more than enough to do, with fraud becoming an increasing problem.

We’ve had people come in, law enforcement people even, who have been scammed by these criminals who are out there who are offering, for a fee, to help people get mortgage modifications. All of these modifications are free. You don’t need to pay anyone to do it. This is a fraud that’s really exploding in all 50 states. We have a number of investigations.

At the same time, the Special Inspector General’s office is concentrating on tracking where the money is going, and coming from, in the TARP. Some of the monies are returned and can be reinvested and some of the returns go to pay down debt.

The repayments of principle – So, for example, if there’s a loan or there’s an investment in preferred stock which is a lot of the big banks you year about – Goldman Sachs and the $10 billion dollars that came back – all that money goes back into the TARP, so it’s still money that can be reused by the administration if they want to announce a new program or to support an existing program, and that’s what we’re talking about exists until to the end of the year, or possibly into next year if the Secretary extends it.

The other things we talk about are profits. Those are the interest payments, the regular dividends that are paid each quarter, or the money that was received on the sale of the warrants…. That money actually goes directly to pay down the debt, so Treasury doesn’t get to reuse the profits, the proceeds, from individual transactions, but the actual core principle – that’s sort of a revolving amount that exists as long as the Secretary has authorization.

And as long as the money goes out, Barofsky says his agency will be tracking and accounting for it. “Every quarter we put out a very comprehensive report on the TARP,” with the next report due in mid-October. While the report is “a couple of hundred pages long”, to help bring transparency to the program, Barofsky says, “we try to make some very easy to use charts and graphs that really account for this money.” He says so far 26 million people have been to their website to view the information.

While the accounting is going on, Barofsky says “one of our primary functions is to deter, detect and investigate criminal activity.” The SIGTARP’s office looks for what Barofsky describes as “the typical markers for securities fraud.”

Did these banks or institutions lie to the federal government to get those billions and billions of dollars? So there you look for things like accounting restatements, you take a look at their books and records, look for those red flags of accounting fraud: those types of issues that we’ve always looked for in securities fraud cases.

In the end, Barofsky says some of the TARP funding was never intended to be repaid. While some of the funds were investments, some was also relief. “While yes, there have been some returns and that’s a good thing and we’re going to keep an eye on it…, we need to be realistic about what this is over time.”

On the Web:

Office of the Special Inspector General for the Troubled Asset Relief Program – sigtarp.gov (Report suspected fraud here)

FederalNewsRadio – Treasury concedes independence of bailout watchdog

FederalNewsRadio – SIGTARP Neil Barofsky on the future of the economy (Federal Drive)

NY Times – Obama’s Speech: ‘TARP on Steroids’

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