Why this outsider's insider account of the bailout is the best book about the financial crisis yet
Whatever else its long-term implications for the nation may be, the great recession of the twenty-first century has been a bonanza for books. Every aspect of the crisis has seemed to justify published explanations, examination, or narratives -- from political appointees, economists, and journalists. On his way out, Timothy Geithner has already said he will do a memoir of his four tumultuous years as Treasury secretary. Federal Reserve Chairman Ben Bernanke has a collection of lectures coming later this month from Princeton University Press. His predecessor, Alan Greenspan, whose reputation has taken a drubbing, is writing an account presumably in an effort to restore his legacy. Given the scale of what the country has endured, it is encouraging that so many interpretations of what has happened are already available, although making time to plow through them and choose which versions are best seems a formidable task for even the most committed reader.
For his own considerable fan base, Jon Stewart made a selection on the Daily Show the other night in hailing Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, by Neil Barofsky, who spent two years as SIGTARP (Special Inspector General for the Troubled Asset Relief Program).
Stewart said he had read at least ten insider accounts of the economic maelstrom and had no idea that they could be "witty and entertaining.'' Had he known, he said, he would have skipped the other nine. The occasion was the release of Barofsky's book in paperback, and based on Stewart's endorsement and the lively interview that followed, it soared to the top of Amazon's bestseller list for the print and e-book versions. Impressed with Stewart's enthusiasm, I downloaded the book and, after spending a snowy afternoon with it, I can understand why he found it so engaging. The impact turns out to be less about the dynamics of economic policy in a period with events still unfolding than what Barofsky describes as the "paranoid weirdness" of Washington. When it was initially published in the summer of 2012, Bailout spent three weeks on the New York Times bestseller list. It sparked a controversy among reviewers divided between those who admired his vivid portrait of Washington's culture of egotistic narcissism and critics who argued he was churlishly populist in his judgments and especially unfair to Geithner and the Obama administration in casting them as virtual captives of the big banks. The banks were the main beneficiaries of the bailout, argued Barofsky, rather than the besieged homeowners who had been an original objective of the program.
Barofsky came to Washington after almost eight years as an assistant U.S. attorney in New York's Southern District, specializing in fraud cases and pursuing the Colombian cocaine cartel. Although a lifelong Democrat, Barofsky was appointed by President George W. Bush in November 2008, after Congress approved TARP and as the national economy veered toward collapse. Barofsky was chosen on the recommendation of Mike Garcia, the U.S. attorney for New York, who seemed more interested in Barofsky's expertise than his politics. The irony of Bailout is that Barofsky is much tougher on Geithner and his team than on the outgoing Bush administration. As Matt Taibbi wrote on his Rolling Stone political blog to mark the release of the paperback, "Bailout is a kind of Alice in Wonderland tale of an ordinary sane person disappearing down into a realm of hallucinatory dysfunction with Tim Geithner playing the role of the Mad Hatter and Barofsky the increasingly frustrated Alice who realizes he's stuck at the stupidest tea party he ever was at."
Geithner's endurance as Treasury secretary as the economy has gradually begun to recover has earned him credit among those in the worlds of finance and journalism who contend that the worst of the looming catastrophe of 2008-09 never happened. In a disparaging review of Bailout, Jackie Calmes, a New York Times Washington correspondent, observed: "As ugly and flawed as the rescue process was, and as galling as Wall Street's revived bravado and bonuses can be to most Americans, the fact remains that an economic collapse was averted ... Yet (Barofsky's) book is a chronicle of complaints that Treasury undercut, blindsided and ignored him."
While his animus toward Geithner and the banks is certainly an important element of Barofsky's account, what makes it fascinating is his scathing assessment of how the self-regard of so many officials in lofty positions dominated their thinking when the country's future was at stake. In a session with one of Barofsky's deputies, Geithner was asked if he could think of any blunders he and his colleagues might have made in administering TARP. "The only real mistake, I can think of," Geithner replied, "is that there were times when we were unnecessarily unsure of ourselves. We should have just realized at the time how right each of our decisions was."
Barofsky resigned as SIGTARP in March 2011 and is now at NYU's law school as an adjunct professor of law and senior research fellow. Almost two years have passed since Barofsky left Washington with a contemptuous view of how the process there worked and (a writer's skill for telling the tale). I agree with Stewart's assessment that Barofsky's account deserves a place in the judgment of history. One thing is certain, Tim Geithner will take full advantage of his coming opportunity to respond in his own book, and Barofsky will get a full share of lumps.
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