Tax and Spend

The head of the TARP program answers the question about where the $700 billion, ultimately over $800 billion, went.

""I wondered the same thing," he said (from memory). "It was amazing to me that no one knew. We gave it to the banks. But no one knew what they did with it. I proposed to Tim Geithner that we find out. He was outraged. He cursed me out, using the F-word. He said it would bring the whole banking system down, if I asked.
"I went ahead and sent out a letter. I didn't really have the authority or the staff to insist. But all of the big banks wrote back. And most of them gave me dodgy responses or gave me the brush-off.
"What did they do with the money? They were supposed to increase lending to help bring about a recovery. None of them did that. Instead, they used it to repay each other's loans. In other words, they used it to reduce the amount of credit available... not increase it. And they bought US agency bonds... just as you'd expect. And they paid out their bonuses.
"In other words, they looked out for themselves... just as you'd expect. I didn't know this information was going to bring down the banking system..."

The bankers are thankful.

""Another thing I wanted to know was exactly how much money was really at risk. We gave away $700 billion. But we also guaranteed loans... and gave lines of credit... and stood behind various financial transactions. I asked how much was at stake... how much was at risk. No one seemed to know. So we added it up. We found a total of $23 trillion. That's ‘trillion' with a capital ‘T.'
"Again, I'm not saying that we would ever have to pay out that much. Some of this was guarantees on top of guarantees and cross-guarantees... very murky... very difficult to disentangle. But I thought it was worth knowing how much we had at risk. And again, the banks didn't want to tell. And the people in the Treasury department didn't want to know."

I hadn't seen that number before.

""The more questions I asked, the more I found myself isolated... and at odds with the Treasury Department, as well as the banks. I was having shouting matches in the Treasury. The banks hated me. And then the undersecretary of the Treasury called me into his office.
"He explained that if I eased up on the banks, I could have a very nice career after the TARP appointment expired. If I didn't play ball with them, I would find it hard to find a job.
"That's how it works. You go along and you get along. If you don't go along with the scams and the technical mumbo jumbo... you're out.""

I imagine he's doing well.

IRS gets warrant to collect financial records of one health care company employee, seizes 60 million health care records on 10 million people. Obama's putting the IRS in charge of Obamacare.