Counterparties: SIGTARP vs. Treasury

April 25, 2012

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to

Two government agencies. Two completely different narratives of the bailouts.

Roughly a week after the Treasury Department extolled the virtues of America’s crisis-era bailout measures, a government watchdog has a very different story to tell. SIGTARP, the office created to oversee the Troubled Asset Relief Program and headed by Christy Romero, has released its latest quarterly report to Congress [PDF].

If you’re struggling to understand the financial crisis and its aftermath, don’t read them back-to-back. One is a story about an against-all-odds victory; the other is about the one that got away.

Last week Treasury estimated that TARP investments, excluding its housing programs, would yield “an overall positive return for taxpayers.” SIGTARP, clearly pushing back against Treasury, says: “It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion.”

In statements to Politico’s Ben White and HuffPost’s Mark Gongloff, Treasury sticks by its story that the bailouts may turn a profit, telling Gongloff “most of the remaining projected cost [of TARP] ($46 billion) is related to foreclosure prevention aid, which was not intended to be recovered.”

It’s worth looking, then, at how foreclosure prevention money is actually being spent. In January, Treasury announced plans to significantly expand its widely maligned HAMP program for struggling homeowners.

SIGTARP’s recommendations for this HAMP expansion are pretty simple – they’re things like setting clear goals and making borrowers prove that they’re actually renting second homes rather than vacationing in them. But Romero complains that Treasury has largely refused to implement these recommendations. “Taxpayers and lawmakers, the office writes, “have an absolute right to know what the Government’s expectations and goals are for using billions of TARP dollars they’ll never get back.”

Regardless of which bailout narrative you believe, we can do better than spending billions without specific goals or accountability. That sounds a bit too much like the first round of bailouts.

And on to today’s links:

EU Mess
The UK is back in recession – Guardian

Billionaire Whimsy
Buffett pushed for higher taxes on the rich; Berkshire lobbied for cuts in private jet fees – WSJ

New Normal
Debt collectors are now “embedded” as employees in emergency rooms – NYT

A breakdown of Apple’s latest amazing quarter – Asymco

Wal-Mart lobbied aggressively to water down anti-bribery law – WashPost
Wal-Mart appoints global anti-bribery watchdog – Reuters

Reuters Opinion
The triumph of the social animal – Chrystia Freeland
When credit cards go social – Felix
When Europe goes to extremes – John Lloyd
Wal-Mart’s bribery is sadly unsurprising – Robert Boxwell
The IMF’s Euro conditions are not what they seem – Hugo Dixon

Unintended Consequences
The basic flaw in our massive disability program that discourages people from working – NYT

“Hedge Funds Perform Better And Cost Less Than Previously Thought, Say Hedge Funds” – Dealbreaker

Sad But Probably True
Netflix is both beloved and likely doomed – Felix
Netflix’s stream of bad news – NYT

Credit Suisse’s net profit falls 96% – and that’s a “sharp turnaround” – WSJ

How the SEC blew the cover of a Wall Street whistleblower – WSJ

Try Again
The new face of private equity, obligatory hard hats included – NYT

“The best fight I’ve ever seen”: Brawl breaks out at elite NYC club – NYT

Esther Dyson: The JOBS Act is just “magical thinking” – Project Syndicate

Tracked Changes
Parsing the Fed: How much the statement changes from March to April – WSJ



Comments are closed.