TARP Bailout Fraud: Where Did the Money Go?

Designed to Fail

Global Research
Stephen Lendman

On December 8, 2008, the Senate confirmed Neil Barofsky’s nomination as Troubled Asset Relief Program (TARP) watchdog. He assumed the post of SIGTARP (Special Inspector General for TARP).On July 20, 2009, he estimated the $700 billion bailout fund could balloon to $23.7 trillion. Obama administration secrecy conceals what’s essential to reveal. Over $9 trillion is known. Some analysts think true figures may be three times that amount. Only crooked bankers and corrupt bureaucrats know for sure.

 In February 2009, Barofsky submitted an initial report to Congress. In the past two months, he said, Washington handed out hundreds of billions of dollars (like confetti) to troubled financial institutions.

Where did the money go, he asked? What assurances exist that it’s not stolen or wasted?

TARP didn’t require recipients to report or internally track funds used. Accountability wasn’t mandated. Banks took full advantage. Instead of loans to stimulate recovery, they hoarded cash, acquired other financial institutions, paid off debt, speculated, and knew then and now there’s plenty more help for the asking.

Fraud prevention standards weren’t imposed. Barofsky doubts the program’s longterm success.

On March 29, 2011, he headlined a New York Times op-ed “Where the Bailout Went Wrong,” saying:

Two and a half years after legislation passed, Obama officials declared mission accomplished. “On my last day as the special inspector general….I regret to say that I strongly disagree.”

TARP and what followed struck out. It “failed to meet some of its  most important goals.” Main Street was sacrificed for  Wall Street.

Congress was told TARP funds would buy up to $700 billion of mortgages. Authorizing legislation (the Emergency Economic Stabilization Act – EESA) emphasized preserving homeownership.

Treasury officials promised help. EESA mandated it. Struggling homeowners got none. Legislative provisions were violated. Treasury changed the rules. Money went to banks with no accountability or mandate to extend credit.

“There were no strings attached: no requirement or even incentive to increase lending to home buyers, and against our strong recommendation, not even a request that banks report how they used TARP funds.”

Instead of increased lending, it declined. As inspector general, Barofsky had no enforcement power. He could only recommend. Suggested policies fell on deaf ears. Treasury and Wall Street conspired to commit grand theft. Ordinary people were hung out to dry and scammed.

Helping homeowners was shelved. The Home Affordable Modification Program (HAMP) was introduced. Obama promised four million families help. The program was “a colossal failure.”

It was designed to fail. Its provisions included no accountability. Guidelines only were provided. Banks and other mortgage services ignored them. Foreclosures mounted. Millions of homeowners were defrauded. Nothing changed to this day.

One of HAMP’s most pernicious abuses was letting servicers “direct borrowers who were current on their mortgages to start skipping payments, telling them that that would allow them to qualify for a HAMP modification,” said Barofsky.

“Homeowners who might have been able to ride out the crisis instead ended up in long trial modifications, after which servicers would deny them a permanent modification and send them an enormous ‘deficiency’ bill.”

“Borrowers who might otherwise never have missed a payment found themselves hit with whopping bills that they couldn’t pay and now faced foreclosure. It was a disaster.”

Geithner bears full responsibility. Understating problems, he admitted solutions “won’t come close” to expectations. He refused to address glaring shortfalls. He abandoned Main Street for Wall Street. He’s complicit in grand theft. He and banker cronies belong in prison.

Banks know they can steal with impunity. They’re larger and more powerful now than when crisis conditions erupted. They can speculate recklessly. They’ll be bailed whenever they get in trouble.

Treasury “ignore(d) rather than support(ed) real” reforms. Its “broken promises” turned TARP and other programs into a giant Wall Street “giveaway.”

Its “mismanagement” and criminal complicity “damaged the credibility of the government….” Conditions are so out of control that future policy makers may be unable “to save the system the next time a crisis arises.”

Perhaps that’s TARP’s “most lasting, and unfortunate, legacy.”

Barofsky’s new book “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street” explains.

Writer/Roosevelt Institute fellow Matthew Stoller calls it “a very important” account of the financial crisis aftermath. In April 2010, Barofsky met a key adversary.

Herbert Allison formerly headed Merrill Lynch, TIAA-CREF and Fannie Mae. He came out of retirement to oversee TARP. He became Assistant Treasury Secretary for Financial Stability.

“Have you thought at all about what you’ll be doing next,” he asked. “Out there in the market, there are consequences for some of the things you’re saying and the way you’re saying them.”

Insight: Top Justice officials connected to mortgage banks

Reuters
Scott J. Paltrow

U.S. Attorney General Eric Holder (R) chats with Assistant Attorney General
in the criminal division of the Justice Department Lanny Breuer before
their testimony on the second day of the Financial Crisis Inquiry
Commission hearing on Capitol Hill in Washington January 14, 2010.

(Reuters) - U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department's criminal division, were partners for years at a Washington law firm that represented a Who's Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

The firm, Covington & Burling, is one of Washington's biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.

Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.

Reuters reported in December that under Holder and Breuer, the Justice Department hasn't brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.

The evidence, including records from federal and state courts and local clerks' offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.

In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners' lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven't responded publicly to any of the requests.

While Holder and Breuer were partners at Covington, the firm's clients included the four largest U.S. banks - Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co - as well as at least one other bank that is among the 10 largest mortgage servicers.

DEFENDER OF FREDDIE

Servicers perform routine mortgage maintenance tasks, including filing foreclosures, on behalf of mortgage owners, usually groups of investors who bought mortgage-backed securities.
Covington represented Freddie Mac, one of the nation's biggest issuers of mortgage backed securities, in enforcement investigations by federal financial regulators.

A particular concern by those pressing for an investigation is Covington's involvement with Virginia-based MERS Corp, which runs a vast computerized registry of mortgages. Little known before the mortgage crisis hit, MERS, which stands for Mortgage Electronic Registration Systems, has been at the center of complaints about false or erroneous mortgage documents.

Court records show that Covington, in the late 1990s, provided legal opinion letters needed to create MERS on behalf of Fannie Mae, Freddie Mac, Bank of America, JP Morgan Chase and several other large banks. It was meant to speed up registration and transfers of mortgages. By 2010, MERS claimed to own about half of all mortgages in the U.S. -- roughly 60 million loans.

But evidence in numerous state and federal court cases around the country has shown that MERS authorized thousands of bank employees to sign their names as MERS officials. The banks allegedly drew up fake mortgage assignments, making it appear falsely that they had standing to file foreclosures, and then had their own employees sign the documents as MERS "vice presidents" or "assistant secretaries."

Covington in 2004 also wrote a crucial opinion letter commissioned by MERS, providing legal justification for its electronic registry. MERS spokeswoman Karmela Lejarde declined to comment on Covington legal work done for MERS.

Student Loan Debt Hell: 21 Statistics That Will Make You Think Twice About Going To College

Blacklisted News
by Michael Snyder

Is going to college a worthwhile investment? Is the education that our young people are receiving at our colleges and universities really worth all of the time, money and effort that is required? Decades ago, a college education was quite inexpensive and it was almost an automatic ticket to the middle class. But today all of that has changed. At this point, college education is a big business. There are currently more than 18 million students enrolled at the nearly 5,000 colleges and universities currently in operation throughout the United States. There are quite a few "institutions of higher learning" that now charge $40,000 or even $50,000 a year for tuition. That does not even count room and board and other living expenses.

Meanwhile, as you will see from the statistics posted below, the quality of education at our colleges and universities has deteriorated badly. When graduation finally arrives, many of our college students have actually learned very little, they find themselves unable to get good jobs and yet they end up trapped in student loan debt hell for essentially the rest of their lives.

Across America today, "guidance counselors" are pushing millions of high school students to go to the very best colleges that they can get into, but they rarely warn them about how much it is going to cost or about the sad reality that they could end up being burdened by massive debt loads for decades to come.

Yes, college is a ton of fun and it is a really unique experience. If you can get someone else to pay for it then you should definitely consider going.

There are also many careers which absolutely require a college degree. Depending on your career goals, you may not have much of a choice of whether to go to college or not.

But that doesn't mean that you have to go to student loan debt hell.

You don't have to go to the most expensive school that you can get into.

You don't have to take out huge student loans.

There is no shame in picking a school based on affordability.

The truth is that pretty much wherever you go to school the quality of the education is going to be rather pathetic. A highly trained cat could pass most college courses in the United States today.

Personally, I have had the chance to spend quite a number of years on college campuses. I enjoyed my time and I have some pretty pieces of parchment to put up on the wall. I have seen with my own eyes what goes on at our institutions of higher learning. In a previous article, I described what life is like for most "average students" enrolled in our colleges and universities today....

The vast majority of college students in America spend two to four hours a day in the classroom and maybe an hour or two outside the classroom studying. The remainder of the time these "students" are out drinking beer, partying, chasing after sex partners, going to sporting events, playing video games, hanging out with friends, chatting on Facebook or getting into trouble. When they say that college is the most fun that most people will ever have in their lives they mean it. It is basically one huge party.

If you are a parent and you are shelling out tens of thousands of dollars every year to pay for college you need to know the truth.

You are being ripped off.

Sadly, a college education just is not that good of an investment anymore. Tuition costs have absolutely skyrocketed even as the quality of education has plummeted.

A college education is not worth getting locked into crippling student loan payments for the next 30 years.

Even many university professors are now acknowledging that student loan debt has become a horrific societal problem. Just check out what one professor was quoted as saying in a recent article in The Huffington Post....

“Thirty years ago, college was a wise, modest investment,” says Fabio Rojas, a professor of sociology at Indiana University. He studies the politics of higher education. “Now, it’s a lifetime lock-in, an albatross you can’t escape.”

Anyone that is thinking of going to college needs to do a cost/benefit analysis.

Is it really going to be worth it?

For some people the answer will be "yes" and for some people the answer will be "no".

But sadly, hardly anyone that goes to college these days gets a "good" education.

To get an idea of just how "dumbed down" we have become as a nation, just check out this Harvard entrance exam from 1869.

I wouldn't have a prayer of passing that exam.

What about you?

We really do need to rethink our approach to higher education in this country.

Posted below are 21 statistics about college tuition, student loan debt and the quality of college education in the United States....

#1 Since 1978, the cost of college tuition in the United States has gone up by over 900 percent.

#2 In 2010, the average college graduate had accumulated approximately $25,000 in student loan debt by graduation day.

#3 Approximately two-thirds of all college students graduate with student loans.

#4 Americans have accumulated well over $900 billion in student loan debt. That figure is higher than the total amount of credit card debt in the United States.

#5 The typical U.S. college student spends less than 30 hours a week on academics.

#6 According to very extensive research detailed in a new book entitled "Academically Adrift: Limited Learning on College Campuses", 45 percent of U.S. college students exhibit "no significant gains in learning" after two years in college.

#7 Today, college students spend approximately 50% less time studying than U.S. college students did just a few decades ago.

#8 35% of U.S. college students spend 5 hours or less studying per week.

#9 50% of U.S. college students have never taken a class where they had to write more than 20 pages.

#10 32% of U.S. college students have never taken a class where they had to read more than 40 pages in a week.

#11 U.S. college students spend 24% of their time sleeping, 51% of their time socializing and 7% of their time studying.

#12 Federal statistics reveal that only 36 percent of the full-time students who began college in 2001 received a bachelor's degree within four years.

#13 Nearly half of all the graduate science students enrolled at colleges and universities in the United States are foreigners.

#14 According to the Economic Policy Institute, the unemployment rate for college graduates younger than 25 years old was 9.3 percent in 2010.

#15 One-third of all college graduates end up taking jobs that don't even require college degrees.

#16 In the United States today, over 18,000 parking lot attendants have college degrees.

#17 In the United States today, 317,000 waiters and waitresses have college degrees.

#18 In the United States today, approximately 365,000 cashiers have college degrees.

#19 In the United States today, 24.5 percent of all retail salespersons have a college degree.

#20 Once they get out into the "real world", 70% of college graduates wish that they had spent more time preparing for the "real world" while they were still in school.

#21 Approximately 14 percent of all students that graduate with student loan debt end up defaulting within 3 years of making their first student loan payment.

There are millions of young college graduates running around out there that are wondering where all of the "good jobs" are. All of their lives they were promised that if they worked really hard and got good grades that the system would reward them.

Sometimes when you do everything right you still can't get a job. A while back The Huffington Post featured the story of Kyle Daley - a highly qualified UCLA graduate who had been unemployed for 19 months at the time....

I spent my time at UCLA preparing for the outside world. I had internships in congressional offices, political action committees, non-profits and even as a personal intern to a successful venture capitalist. These weren't the run-of-the-mill office internships; I worked in marketing, press relations, research and analysis. Additionally, the mayor and city council of my hometown appointed me to serve on two citywide governing bodies, the planning commission and the open government commission. I used to think that given my experience, finding work after graduation would be easy.

At this point, however, looking for a job is my job. I recently counted the number of job applications I have sent out over the past year -- it amounts to several hundred. I have tried to find part-time work at local stores or restaurants, only to be turned away. Apparently, having a college degree implies that I might bail out quickly when a better opportunity comes along.

The sad truth is that a college degree is not an automatic ticket to the middle class any longer.

But for millions of young Americans a college degree is an automatic ticket to student loan debt hell.

Student loan debt is one of the most insidious forms of debt. You can't get away from student loan debt no matter what you do. Federal bankruptcy law makes it nearly impossible to discharge student loan debts, and many recent grads end up with loan payments that absolutely devastate them financially at a time when they are struggling to get on their feet and make something of themselves.

So are you still sure that you want to go to college?

Another open secret is that most of our colleges and universities are little more than indoctrination centers. Most people would be absolutely shocked at how much unfiltered propaganda is being pounded into the heads of our young people.

At most colleges and universities, when it comes to the "big questions" there is a "right answer" and there is virtually no discussion of any other alternatives.

In most fields there is an "orthodoxy" that you had better adhere to if you want to get good grades.

Let's just say that "independent thought" and "critical thinking" are not really encouraged at most of our institutions of higher learning.

Am I bitter because I didn't do well? No, I actually did extremely well in school. I have seen the system from the inside. I know how it works.

It is a giant fraud.

If you want to go to college because you want to have a good time or because it will help you get your career started then by all means go for it.

Just realize what you are signing up for.

Barack Obama to Turn over Entire Mortgage Industry to the Banks that Used Credit Default Swaps

Truthdig
Robert Scheer

A most dastardly deed occurred last Friday when the Obama administration issued a 29-page policy statement totally abandoning the federal government’s time-honored role in helping Americans achieve the goal of homeownership. Instead of punishing the banks that sabotaged the American ideal of a nation of stakeholders by “securitizing” our homesteads into poker chips to be gambled away in the Wall Street casino, Barack Obama now proposes to turn over the entire mortgage industry to those same banks.

The proposal, originated by Treasury Secretary Timothy Geithner, involves nothing less than a total “winding down” of the 80-year-old federal housing program, setting instead a new goal of a two-tiered America in which the masses are content to be mere renters of the American Dream. Such a deal for a country where, as the report concedes, “Half of all renters spend more than a third of their income on housing, and a quarter spend more than half.”

This is the same Geithner who during his tenure in the Clinton Treasury Department championed the total deregulation of the then-emerging market in collateralized debt obligations that sliced and diced people’s home mortgages into the toxic securities that created what his new report calls the greatest economic crisis since the Great Depression. Later, as president of the New York Fed, he cheered on the banks as they went hog-wild, conning folks into buying homes they couldn’t afford and stuffing them into the incomprehensible securities that form the rot at the core of our bankrupt economy.  

This is a made-in-the-U.S. nightmare that we inflicted on the world, thanks to an explosion in those toxic securities brought on by the deregulation that most of the Obama economic brain trust supported when they worked for President Bill Clinton and during the ensuing bubble years when they enriched themselves. As the report admits: “The U.S. is … the only high income country in which securitization plays a major role in housing finance.” Yet instead of ending that practice Obama now calls for more of the same: “The Administration believes the securitization market should continue to play a key role in housing finance.” 

Indeed, the plan’s goal of eliminating Fannie Mae and Freddie Mac will dry up the alternative public funding that has provided a source of mortgage support ever since President Franklin Delano Roosevelt launched Fannie Mae to check the power of the banks over mortgages. Now Obama proposes to eliminate that check and leave would-be homeowners to the tender mercy of the banking giants.

Of course Fannie Mae and Freddie Mac also bear responsibility for the meltdown. They had morphed into for-profit enterprises and, just as with the Wall Street firms, the massive bonuses paid out to their top executives were contingent on the value of their stock prices, which in turn were fattened by the sale of those same toxic assets. As the Obama report puts it, “Fannie Mae and Freddie Mac’s profit-maximizing structure undermined their public mission.” What the administration should have proposed is to return the government-sponsored housing agencies to their original function as nonprofit entities supplementing, rather than aping, the practices of greedy bankers.

It wasn’t meant to end this way, and key Democrats, quite a few of them Clinton alums now in the Obama administration, bear the responsibility for the sad fate of Roosevelt’s dream. As the Obama proposal concedes: “Improving how housing was financed was an important part of these broader Depression-era reforms. In the 1930s, following severe mortgage market disruptions, widespread foreclosures, and sinking homeownership rates, the government created the Federal Housing Administration (FHA), Fannie Mae, the Federal Home Loan Banks (FHLBs) and several decades later, Freddie Mac to help promote secure and sustainable homeownership for future generations of Americans. Fannie Mae and Freddie Mac held true to their original mission for many years.” What the report then neglects to discuss is the demise of Roosevelt’s grand experiment at the hands of Democratic Party hustlers who turned the agencies away from their “original mission” and into their personal piggy banks while getting Democrats in Congress to approve regulations enabling their greed.

The folks around President Obama know this sad tale well because some of them were principal actors in the housing agencies’ betrayal of the public trust. Just take the case of Tom Donilon, whom Obama recently appointed to the highly sensitive position of national security adviser. It was Donilon who was the top legal counsel and lobbyist for Fannie Mae from 1999 to 2005, a period when the agency went off the tracks in backing Countrywide and other private-sector bandits in their irresponsible rip-off scams. “He was in charge of the lobbyists. … That process involved using the Hill to rein in the regulators,” noted Stephen Blumenthal, who, as director of the Office of Federal Housing Enterprise Oversight, was hindered by Donilon’s lobbying. As the report concedes without mentioning Donilon’s role, “Over the years, Fannie Mae and Freddie Mac’s aggressive lobbying efforts had successfully defeated efforts to bring them under closer supervision.” 

Donilon, who received $10 million in the three years leading up to the scandal of 2004, when Fannie Mae was fined $400 million for juggling its books to enhance executive bonuses, will never have any trouble financing a home purchase. Not so the tens of millions of Americans who have lost their homes because of his reprehensible actions and the many more in the future who will be denied government support in trying to get a place of their own. 

Nearly 11 Percent of US Houses Empty

I usually find the quarterly homeowner vacancy and homeownership report from Census pretty lackluster, but the latest one released this morning was anything but.

America's home ownership rate, after holding steady for a while, took a pretty big plunge in Q4, from 66.9 percent to 66.5 percent. That's down from the 2004 peak of 69.2 percent and the lowest level since 1998.


Homeownership is falling at an alarming pace, despite the fact that home prices have fallen, affordability is much improved and inventories of new and existing homes are still running quite high.

Bargains abound, but few are interested or eligible to take advantage. 


More concerning than the home ownership rate is the vacancy rate. The Census tables don't tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that's only dropped by about 30 thousand in the past year. 38 million are rented, but that's up by over a million year over year. That means more new households are choosing to rent. 



Now to vacancies. There were 18.4 million vacant homes in the U.S. in Q4 '10 (11 percent of all housing units vacant all year round), which is actually an improvement of 427,000 from a year ago, but not for the reasons you'd think. 


The number of vacant homes for rent fell by 493 thousand, as rental demand rose. 471,000 homes are listed as "Held off Market" about half for temporary use, but the other half are likely foreclosures. And no, the shadow inventory isn't just 200,000, it's far higher than that.

So think about it. Eleven percent of the houses in America are empty. This as builders start to get more bullish, and renting apartments becomes ever more popular. Vacancies in the apartment sector have been falling steadily and dramatically, why? Because we're still recovering emotionally from the toll of the housing crash. 

Younger Americans have seen what home ownership has done to their friends and families, and many want no part of it. Credit has become very nearly elitist. Home prices, whatever your particular data provider preference might be, are still falling. 

Banks, Fannie [FNM  0.4905    0.0035  (+0.72%)   ] and Freddie [FRE  3.26    0.01  (+0.31%)   ] are holding on to hundreds of thousands of properties, and we don't know exactly when or how they'll sell them.