Posted on Tuesday, March 22, 2011
THE American taxpayer will lose a rare straight shooter when Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, leaves his post on March 30. In his frequent testimony before Congress and in the nine quarterly reports and 13 audits his office has published, Mr. Barofsky has served taxpayers well by speaking truth to the powers at the Treasury.
This has often put him at odds with the Treasury officials whose work he is charged with overseeing — a natural consequence for any watchdog with teeth. Using facts, figures and extensive interviews, Mr. Barofsky has questioned the effectiveness of the administration’s loan modification program and the Treasury’s initial refusal to require institutions that received taxpayer-financed bailouts to account for their use of TARP funds.
He has also criticized the bank-friendly terms of the rescue in 2008 of the American International Group; that deal was led by Timothy F. Geithner, the Treasury secretary, who at the time was president of the Federal Reserve Bank of New YorkUnlike others in Washington, Mr. Barofsky has also spoken passionately about the continuing problems posed by too-big-to-fail financial institutions.
In addition to his candor, Mr. Barofsky delivered a solid prosecutorial record. Since it was created in the fall of 2008, his office has won criminal convictions of 18 people, helped keep $555 million in taxpayer funds from being lost to fraud and provided the Treasury with 68 recommendations to protect taxpayers from losses in its programs. The office — known as Sigtarp, for special inspector general for the TARP program — continues to work on 153 civil and criminal investigations, including 74 involving executives and senior officers at financial institutions who received or applied for TARP money.
Working on behalf of the taxpayer did not seem to win Mr. Barofsky many friends at the Treasury. In April 2009, for example, the Treasury’s acting general counsel advised Mr. Barofsky that he would seek a legal opinion from the Justice Department about whether Mr. Geithner had supervisory authority over Sigtarp. Never mind that Congress had specifically created the special inspector general to be an independent entity within Treasury that did not report to the Treasury secretary. After Congress’s intention was pointed out to Treasury, its officials backed off.
But comments by unnamed Treasury officials deriding Mr. Barofsky and his work often appeared in news articles after he published his reports. In mid-February, when he announced his retirement, an unidentified Treasury source told The Washington Post that the news was “a nice valentine to us.”
Now comes the business of replacing Mr. Barofsky — a decision that President Obama must make. In his resignation letter to Mr. Obama, Mr. Barofsky said that his office’s team, led by its deputy special inspector general, Christy Romero, is “fully prepared to continue advancing” its mission.
Mr. Barofsky declined to comment about who might replace him.
With 153 continuing investigations covering possible accounting fraud, securities fraud, insider trading, mortgage servicer improprieties, obstruction of justice and other possible misconduct, it could not be more important that the person who takes over continues his vigorous approach. The inspector general’s mission will continue until the last TARP dollar has been repaid and a forceful pursuit of these inquiries sends a powerful message that at least some miscreants are being held accountable. Recently, there was roughly $160 billion outstanding among TARP recipients.
Government rules for filling vacancies in executive agencies like Mr. Barofsky’s give Mr. Obama three choices. If the president does nothing, Ms. Romero will take over temporarily as acting head. The president can also name someone who has already been appointed to another executive agency position and has therefore received the Senate’s consent. Finally, Mr. Obama could appoint someone else from within Sigtarp.
An administration official would say only that the president would nominate the most qualified person for the post as soon as possible.
Behind the scenes, however, a Treasury official is arguing on Capitol Hill that no one from inside Sigtarp be appointed to head the office, according to three people who were briefed on the matter but who are unauthorized to speak publicly about it.
That official, Eric Thorson, the inspector general for the Treasury Department, has spoken against an appointment of Ms. Romero or other internal candidates, these people said. He has not yet identified a preferred candidate but appears to be trying to get a blessing from Congress for an outsider to be appointed.
A phone message left with Mr. Thorson on Friday was returned by Rich Delmar, counsel to the Treasury inspector general. He said that with respect to Ms. Romero, Mr. Thorson “doesn’t know her and has no opinion on her qualifications for this position.”
Unlike Mr. Barofsky, Mr. Thorson — in his role as inspector general of the Treasury — reports to Mr. Geithner. When asked whether higher-ups in the department were directing Mr. Thorson to Steve Adamske, a Treasury spokesman, said no.
Senator Charles Grassley, the Iowa Republican who has worked to strengthen the independence of agency-appointed inspectors general, has often praised Mr. Barofsky’s approach to oversight.
Regarding his replacement, Mr. Grassley said: “The principle of advise and consent is especially important here because TARP has been so controversial and involved hundreds of billions of tax dollars. The Vacancies Act is intended to protect this check on the president’s power and give the people’s branch of government the opportunity to make sure the special inspector general’s office remains independent and effective.”
LAST week, Mr. Barofsky testified before the Senate for the last time as special inspector general. His comments were, typically, and refreshingly, straightforward.
“For all its help in rescuing the financial system from the brink of collapse, TARP may have left a truly frightening legacy,” he said. “It has increased the potential need for future government bailouts by encouraging the too-big-to-fail financial institutions to become even bigger and more interconnected than before, therefore increasing their ultimate danger to the financial system, while at the same time, Treasury’s mismanagement of TARP and the resulting deep unpopularity of the program have decreased the government’s ability to actually accomplish such bailouts in the future, even if necessary.”
Later this spring, Mr. Barofsky will become an adjunct professor at the School of Law at New York University and a senior fellow at its Center on the Administration of Criminal Law. His anonymous critics at the Treasury will probably not miss him, but taxpayers will.
By GRETCHEN MORGENSON, THE NEW YORK TIMES