kent nickell
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"""The former New York prosecutor said the decision to expand the Talf to encourage investors to buy distressed, or ?legacy?, assets from banks could put public money behind investments that were backed by fraudulent mortgages.
?We know the triple A rating [ascribed to the securities by credit rating agencies] was a sham. We could be buying securities that are backed with assets that we know were likely riddled with fraud.?"""
http://www.ft.com/cms/s/0/163c85c4-2789-11de-9b77-00144feabdc0.html
Tarp investigator seeks evidence of book fiddling
By Tom Braithwaite in Washington
Published: April 12 2009 23:32 | Last updated: April 12 2009 23:32
The official policing the $700bn Tarp fund says he is investigating whether banks have ?cooked their books? to secure bail-out money.
Neil Barofsky, special inspector-general for the troubled asset relief programme, told the Financial Times he was seeking evidence of wrongdoing on the part of banks receiving help from the fund, which was designed to ease credit conditions and support distressed industries.
?I hope we don?t find a single bank that?s cooked their books to try to get money but I don?t think that?s going to be the case,? said Mr Barofsky, who has been dubbed the ?Tarp cop?.
Just how banks value mortgage-backed securities and other assets on their books has been an issue of intense debate as the financial crisis has unfolded.
Large banks from Citigroup to Goldman Sachs and hundreds of regional banks have taken billions from Tarp to rebuild balance sheets weakened by the financial crisis.
But institutions applying for Tarp money had to show they were fundamentally sound, potentially prompting them to mis-state their assets and liabilities.
Mr Barofsky also said the Treasury?s expanded term asset-backed securities loan facility (Talf) was ripe for fraud.
The former New York prosecutor said the decision to expand the Talf to encourage investors to buy distressed, or ?legacy?, assets from banks could put public money behind investments that were backed by fraudulent mortgages.
?One of our strongest recommendations of the last report was do not expand the Talf to buying legacy assets. If its structure is not changed considerably it?s very, very dangerous,? he said.
?We know the triple A rating [ascribed to the securities by credit rating agencies] was a sham. We could be buying securities that are backed with assets that we know were likely riddled with fraud.?
Mr Barofsky revealed at a Congressional hearing earlier this month that he was involved with ?probably more than a dozen? investigations into possible wrongdoing and fraud. He told the FT that potential fraudsters would pay attention when his team began seeking indictments. ?Indictments can serve as great deterrents,? he said.
Mr Barofsky declined to detail what crimes institutions could have committed. But securities fraud, wire fraud and false statement were all possible lines of inquiry, he said.
In the first public allegation of Tarp fraud, the Securities and Exchange Commission, with assistance from Mr Barofsky?s office, claimed in January that ProTrust, a Nashville-based company, offered clients a fictitious opportunity to invest in the government?s bail-out scheme.
With scant reporting requirements when the bail-outs began at the end of last year, banks had a fairly free rein on what to do with Tarp money. Concerned about a lack of transparency, Mr Barofsky has written to all of them to ask how the funds were spent.
?We haven?t served a single subpoena,? he says. The preliminary audit will be published in the next few weeks, after analysis of the ?pretty detailed descriptions with what banks say they?ve done with the money?.
That fulfils part of his office?s transparency remit and is not necessarily a trawl for fraud. But big banks are potential targets.
The energetic ? and potentially aggressive ? approach to following the money chimes with the belated rush to oversight in Congress and the outrage over how legislation allowed $165m bonuses to be paid to executives at AIG, the bailed-out insurance group.
?One of our main areas of focus [on executive compensation] is to see if there was a significant communications breakdown as to how that policy decision was made,? says Mr Barofsky.
?We know the triple A rating [ascribed to the securities by credit rating agencies] was a sham. We could be buying securities that are backed with assets that we know were likely riddled with fraud.?"""
http://www.ft.com/cms/s/0/163c85c4-2789-11de-9b77-00144feabdc0.html
Tarp investigator seeks evidence of book fiddling
By Tom Braithwaite in Washington
Published: April 12 2009 23:32 | Last updated: April 12 2009 23:32
The official policing the $700bn Tarp fund says he is investigating whether banks have ?cooked their books? to secure bail-out money.
Neil Barofsky, special inspector-general for the troubled asset relief programme, told the Financial Times he was seeking evidence of wrongdoing on the part of banks receiving help from the fund, which was designed to ease credit conditions and support distressed industries.
?I hope we don?t find a single bank that?s cooked their books to try to get money but I don?t think that?s going to be the case,? said Mr Barofsky, who has been dubbed the ?Tarp cop?.
Just how banks value mortgage-backed securities and other assets on their books has been an issue of intense debate as the financial crisis has unfolded.
Large banks from Citigroup to Goldman Sachs and hundreds of regional banks have taken billions from Tarp to rebuild balance sheets weakened by the financial crisis.
But institutions applying for Tarp money had to show they were fundamentally sound, potentially prompting them to mis-state their assets and liabilities.
Mr Barofsky also said the Treasury?s expanded term asset-backed securities loan facility (Talf) was ripe for fraud.
The former New York prosecutor said the decision to expand the Talf to encourage investors to buy distressed, or ?legacy?, assets from banks could put public money behind investments that were backed by fraudulent mortgages.
?One of our strongest recommendations of the last report was do not expand the Talf to buying legacy assets. If its structure is not changed considerably it?s very, very dangerous,? he said.
?We know the triple A rating [ascribed to the securities by credit rating agencies] was a sham. We could be buying securities that are backed with assets that we know were likely riddled with fraud.?
Mr Barofsky revealed at a Congressional hearing earlier this month that he was involved with ?probably more than a dozen? investigations into possible wrongdoing and fraud. He told the FT that potential fraudsters would pay attention when his team began seeking indictments. ?Indictments can serve as great deterrents,? he said.
Mr Barofsky declined to detail what crimes institutions could have committed. But securities fraud, wire fraud and false statement were all possible lines of inquiry, he said.
In the first public allegation of Tarp fraud, the Securities and Exchange Commission, with assistance from Mr Barofsky?s office, claimed in January that ProTrust, a Nashville-based company, offered clients a fictitious opportunity to invest in the government?s bail-out scheme.
With scant reporting requirements when the bail-outs began at the end of last year, banks had a fairly free rein on what to do with Tarp money. Concerned about a lack of transparency, Mr Barofsky has written to all of them to ask how the funds were spent.
?We haven?t served a single subpoena,? he says. The preliminary audit will be published in the next few weeks, after analysis of the ?pretty detailed descriptions with what banks say they?ve done with the money?.
That fulfils part of his office?s transparency remit and is not necessarily a trawl for fraud. But big banks are potential targets.
The energetic ? and potentially aggressive ? approach to following the money chimes with the belated rush to oversight in Congress and the outrage over how legislation allowed $165m bonuses to be paid to executives at AIG, the bailed-out insurance group.
?One of our main areas of focus [on executive compensation] is to see if there was a significant communications breakdown as to how that policy decision was made,? says Mr Barofsky.