Watchdog- “Causes Of Financial Crisis Have Not Been Addressed”.
“The Bank Bailouts Have Created More Risk in The System”.
Neil Barofsky, who is the special inspector general for TARP (The Troubled Asset Relief Program) states quite clearly in a quarterly report that was released to Congress last Sunday, January 31, 2010 that the problems that led to the last financial crisis have not yet been addressed, and in some cases have actually grown worse.
“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”.
And referring to the “Too big to fail approach” he added, “The government’s bailout of financial institutions deemed “too big to fail” has created a risk that the United States could face a worse fiscal meltdown in the future, and the $700 billion financial bailout has encouraged more risk-taking because bank executives, who are still receiving massive bonuses, figure the government will come to the rescue the next time they steer their ships nearly aground”.
The report warns that these supports mean the government has done more than simply support the mortgage market, and in many ways has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor.
“The government has stepped in where the private players have gone away and if we take government resources and replace that market without addressing the serious underlying concerns, there really is a risk of artificially pushing up home prices in the coming years”.
The report also revealed that, while the Obama administration pledged to spend $75 billion to prevent foreclosures, that only a tiny fraction of it amounting to just over $15 million has been spent so far and figures indicate that under the Making Home Affordable program, only about 66,500 borrowers, or only 7% of those who signed up had completed the process as of December.
And it might be worth noting that even though there are growing calls for another stimulus bill, in spite of the fact that only 30% of the first $700 billion has so far made its way into the system and the real jobless rate is now at 17.5% if the jobless that have given up looking for work are included.
Sen. Susan Collins, R-Maine, who is the ranking member of the Senate Homeland Security and Governmental Affairs Committee said, “The market mentality now seems fixed that the U.S. government will continue to step in and bail out giant financial institutions. The IG’s findings confirm my decision to oppose releasing $350 billion in TARP funds last year and my recent vote to terminate the program altogether”.
And Rep. Darrell Issa, R-Calif., who is the ranking member on the House Oversight and Government Reform Committee added, “The SIGTARP’s report is just another reminder of how Congress and the administration have ignored the role that politics and government played in causing the housing crisis and the economic collapse while pursuing other regulatory reforms will not fix the underlying problem”.
Last 10 posts by Michael Redbourn
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- The End Of Many Democracies Is Near - March 9th, 2010
- Not Only Is Israel Not An Apartheid State - March 4th, 2010
- The Dubai Liquidation - February 27th, 2010
- The Fiscal Stimulus Package Of 2009 Was A Failure - February 23rd, 2010
- Liberals Turn A Blind-Eye To Reality - February 17th, 2010
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