I’ve said it before and I’ll say it again. At some point down the road, we need to make a statue to honor Neil Barofsky. He is the SIGTARP, the Special Inspector General for Troubled Asset Relief Program, who has been perhaps the most honest man in Washington, DC. Barofsky has crossed swords with just about everybody since joining the Treasury Department in December, 2008. Mostly with Wall Street banks, the Federal Reserve Bank of New York, AIG, Hank Paulson, Timothy Geithner, George W. Bush and Barack Obama. Pretty fearless, huh? Now, Barofsky is preparing to aid the SEC in preparing criminal and civil charges over a possible cover-up concerning the bailout of AIG.

Arriving at the Treasury Department, Barofsky was given a tiny office in the basement next to a sewer main break. Nice to be wanted? Assigned to investigate and oversee the allocation of TARP money and watch out for any fraud or waste, Barofsky immediately began stepping on many toes. As a former prosecutor, he knew how to unravel a mystery wrapped in an enigma. The financial collapse of 2008 certainly qualified. His first battles was in obtaining records from all the parties involved, including from his then and current bosses, Treasury Secretaries Henry Paulson and, later, Timothy Geithner. Barofsky also wanted documents from the New York Federal Reserve Bank, which Geithner was head of in 2008.

At one point during May-June, 2009, Barofsky ruffled so many feathers on Wall Street and in Washington that there was much talk of him being fired by President Obama. Barofsky was one of three Special Inspector Generals assigned to oversee TARP that came under fire for their testimonies to Congress and statements to the press. But Barofsky was undeterred by his critics and pressed harder than ever.

Much of what we currently know about how TARP money was used is thanks to the efforts by Barofsky and the other SIGTARPs. Appearing before Congress last year, he took a sharp aim and revealed how AIG had compensated Goldman Sachs and other creditors for 100% of their losses resulting from AIG’s failed credit default swaps (CDS). Monies obtained by AIG from U.S. taxpayers through TARP went to these mega-banks with seemingly little or no negotiations, as is custom during settling a bankruptcy.

At the center of this was Timothy Geithner, who handled the salvaging of American International Group while head of the Federal Reserve Bank of New York in 2008. Barfosky claims that there was unwarranted secrecy in the deal. He alleges that there may have been a cover-up by the New York Fed bank, which could lead to criminal of civil charges.

On April 20th of this year, Barofsky testified before the Senate Finance Committee and said that seven AIG deals were being investigated as well. These deals were similar to those which prompted the SEC to file a civil lawsuit against Goldman Sachs. Barofsky told the senators that he was coordinating with the SEC. He also told the committee members that some $50 Billion dollars used as part of an Obama administration plan to aid home owners has been “ineffectual”. The program to modify loans for 230,000 home owners.

Barofsky is critical of how both the Bush and Obama administrations have handled the financial crisis thus far. In a report from October, 2009, he said that former Treasury Secretary, Henry Paulson, allocated TARP funds to nine banks that were “healthy”. Barofsky told Bloomberg Magazine, “There’s a reason there are Tea Partiers out there, and when you look at it, anger at the bailout is one of the first things they talk about.” He added, “This Treasury Department and the previous Treasury Department bear some of the responsibility for not being straightforward with the American people.”

Senator Charles Grassley (R-IA) has been a supporter of Barofsky throughout his tenure as a SIGTARP. Grassely said Barofsky, “The special inspector general for TARP hit the ground running. He’s the kind of watchdog taxpayers need and deserve.” Grassley helped write the legislation creating SIGTARP. They consist of some 40 agents from various Federal agenicies, including Treasury, the FBI and IRS. They can subpoena, make arrests and carry guns.
Despite all the high-profile toes Barofsky is stepping on, he does not carry a gun. No stranger to danger, Neil Barofsky has been chasing bad guys for many years. As a U.S. District Attorney, he was threatened with kidnapping and death by members of the narco-terror group, the Revolutionary Armed Forces of Columbia (FARC) in 2005. The still on-going investigation into FARC drug trafficking has resulted in 50 indictments. Barfosky keeps a FARC bayonet in his office as a memento. In November, 2008, he was investigating mortgage fraud when the Bush administration tapped Barofsky, a Democrat, for SIGTARP. His old boss, former U.S. Attorney, Michael Garcia, told Neil, “The most qualified person for this job is you.” Garcia then warned Barofsky, “This is an hour of crisis,…People will not like you.”

After some initial conflicts within the Treasury Department, SIGTARP, became independent, reporting directly to the White House and to Congress. In April, 2009, Barofsky moved out of the Treasury Building and relocated to SIGTARP’s new offices several blocks away. The essential elements of his latest allegations are that there has been a “culture of secrecy”. Last November, Barofsky issued a report critical of Timothy Geithner in not securing discounts while head of the Federal Reserve Bank of New York as AIG paid out some $62 Billion dollars of TARP money to various mega-banks both in the U.S. and abroad. Criminal or civil charges may result if there was a deliberate cover up on these transactions. SIGTARP has since grown in size as over 80 investigators look into some 20 separate cases involving TARP funds.