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Tuesday, April 21, 2009

Inspector General Barofsky on TARP

by Calculated Risk on 4/21/2009 12:02:00 AM

From the WSJ: TARP Watchdog Urges Better Oversight

A report by the TARP watchdog said the Treasury should take steps to better manage its financial-rescue effort so that taxpayer dollars are safeguarded and programs are more fraud-resistant, accountable and transparent.
And on the potential for gaming the PPIP:
"The significant Government-financed leverage presents a great incentive for collusion between the buyer and seller of the asset, or the buyer and other buyers, whereby, once again, the taxpayer takes a significant loss while others profit," [the report said]
This is the second quarterly report to Congress on the $700 billion TARP.

From the LA Times: Inspector general cites potential flaws in bank bailout, urges Treasury to adopt safeguards. An excerpt on the PPIP:
"The sheer size of the program ... is so large and the leverage being provided to the private equity participants so beneficial, that the taxpayer risk is many times that of the private parties, thereby potentially skewing the economic incentives," the report states.
This is harsh criticism of the PPIP (well deserved in my view). And a pretty critical report of the overall handling of the TARP.