TARP Watchdog Neil Barofsky: Government Bailout Has Increased Risk Of Economic Crisis

[Beacool]

WASHINGTON — The government's response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.

The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky wrote.

Since Congress passed $700 billion financial bailout, the remaining institutions considered "too big to fail" have grown larger and failed to restrain the lavish pay for their executives, Barofsky wrote. He said the banks still have an incentive to take on risk because they know the government will save them rather than bring down the financial system.

http://www.huffingtonpost.com/2010/01/31/tarp-watchdog-neil-barofs_n_443489.html


Now what?

:-(

[DJ13]

1. Theres really only one way to fix this (though Obama wont go there)

Seize the TBTF banks, and separate the investment portion (splitting them into small pieces) from the banking portion (creating several regional banks out of them), then restrict all banks from co-mingling investments with banking from now on.

Trying to keep them intact is just foolish in the face of future problems.

[Beacool]

3. That's basically what my brother has been saying.

He's an economist for France and Spain. That's also what other economists in Europe think too (he goes so often to Brussels, where the headquarter of the European Commission is located, that he finally rented an apt.). He warned that the US will suffer another recessive period and that it may take 15 years to fully recover.

:(

[brentspeak]

2. Where are all the tools who claimed that TARP "saved the U.S. from a depression"?

[Beacool]

5. TARP staved off the flood.

But unless the root cause of what caused the economic collapse in the first place is remedied, then it was just a temporary fix which will not lead to a long term recovery.

[emilyg]

4. kick