Ex-TARP Watchdog Unleashes on 'Monster' Banks, Reform Law

by 27 Aug 2012

(CNBC) -- The most popular error of our age is the belief that bureaucratic reforms will resolve deep moral and social problems.

If only we tweak the incentives, nudge the right people in the right direction, provide adequate supervision, we can set things right — or so some people think.

When it comes to the financial system at least, this is pure delusion. In the decades following the Great Depression, the policy responses to market upheaval — namely, more regulation — has been proven false. Yet each generation seems doomed to experience that for itself.

Neil Barofsky, the former watchdog of the Troubled Asset Relief Program, says as much himself (Read more: "If TARP is So Profitable, Why Not Bail Out Everyone?"). He let loose on the Obama administration's embrace of regulatory ideology in a column for Yahoo Wednesday. Barofsky wrote:


In the aftermath of the financial crisis, the country was faced with a choice of what to do with these corporate abominations. Furiously beating back the efforts of reformers who sought to dismantle these monsters once and for all, the Obama administration chose to keep them largely intact. Instead, it sought to control their predatory and dangerous nature through the Dodd-Frank Wall Street Reform Act, a complex set of regulatory shackles that comprised more than 800 pages of legislation and called for hundreds of new regulatory rules. In essence, the administration's approach was to entrust the regulators to build the perfect set of chains to prevent the banks from recreating financial Armageddon.

The administration touts Dodd-Frank legislation (learn more) as proof that it is serious about bank reform (and that Mitt Romney and Paul Ryan aren't). This, however, is nonsense. In fact, the Obama administration's position amounts to shielding the banks from real reform that would dismantle them. (Read more: "Does Dodd-Frank Legislation End Too Big to Fail?")

In Barofsky's words:

As [a recent speech by vice president Joe Biden] makes clear, the Obama administration is not walking away from its protection of the big banks through Dodd-Frank (albeit in a somewhat shackled form), and with Wall Street's campaign dollars pouring into Romney's war chest, a dramatic shift from him seems equally unlikely.

Which makes you wonder: how'd a guy as smart and honest as Barofsky ever get tapped to do oversight on the bailout?

Read article from CNBC


  • by Time4change | 8/27/2012 2:44:06 PM

    I believe this article is as accurate as it gets as to the banks, bailout, Dodd Frank, and now CFPB. It is all for show because whereas we need rules to live by, the Golden Rule is what we should all operate by and if we break laws including redlining and fraud then we need to be in the slammer. Periord.

  • by William Matz | 8/28/2012 12:45:57 PM

    Thankfully, there are a few folks who don't seem to be corrupted by the system. What is puzzling is that so many of the actions/reforms clearly don't work. So are they done just for the illusion of government helping? The irony is that these actions don't even seem to be in the best long-term interest of Wall Street. Perhaps the honest explanation is that nobody in government knows what to do, and so we are just seeing an endless series of actions that kick the can down the road.

  • by Lou | 8/29/2012 2:00:00 AM

    Wall Street and the compromised banks should have been allowed to fail. Executives should have been held to account criminally and legally. That's what I urged Senators Feinstein and Boxer. They, of course, knew better and ignored this free advice. Mr. Barofsky should have said something and complained loudly when he was inside. His comments now mean nothing. Typical self-serving pap from career beltway types. The banks had, and will continue to have the last laugh. All the way to the bank.


Should CFPB have more supervision over credit agencies?