Neil Barofsky, the Special Inspector General overseeing TARP says recipients of aid under the program may defraud investors of tens of billions. As the LA Times is reporting…
…federal investigators said Monday they have opened 20 criminal probes into possible securities fraud, tax violations, insider trading and other crimes.
Geithner’s plan to remove toxic assets from bank balance sheets (the Public-Private Investment Program, hence “PPIP”) is perhaps the biggest invitation to fraud. This was obvious to everyone as soon as the plan was announced (OA wrote Anatomy of a Giveaway and Gaming the Geithner Plan). Anyway, thank goodness someone in Washington besides Elizabeth Warren is pointing this out.
There is much more in this report, including the most detailed description of TARP and the investments made under it that I’ve seen published. And on pages 61-67, there’s a fantastic tutorial that explains balance sheet dynamics, in particular The Accounting Equation and the difference between Tier 1 Capital and Tangible Common Equity. If you haven’t seen OA’s tutorials on these topics, we recommend you definitely read pages 61-67. If you want to understand the financial crisis, these are THE most important things to know.
Hopefully folks get a chance to at least skim the whole report. And they should keep a copy as a desk reference. The pdf is available for download here.