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TARP Inspector Probes Bailout Fraud, Warns of Program’s Pitfalls

Neil Barofsky, the special inspector general assigned to monitor the banking bailout, discusses his office's ongoing investigations into potential fraud in the TARP program and recent warnings on taxpayer risk.

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  • JEFFREY BROWN:

    It has a mouthful of a name, the Office of the Special Inspector General for the Troubled Asset Relief Program, and a whale of a task: to be a watchdog over what's now grown to 12 separate bailout-related programs involving government funds and commitments of almost $3 trillion.

    Its latest findings have just been released in a report that warns of the risks of fraud and abuse in the bailout programs and questions whether taxpayers are getting enough information about how their money is being used.

    Neil Barofsky, a former federal prosecutor, heads the office and joins me now.

    And welcome to you.

    NEIL BAROFSKY, special inspector general, TARP: Thank you.

  • JEFFREY BROWN:

    Enormous amounts of money that we're talking about. How hard is it to keep track of? Who is doing it? Or is that the issue that you are addressing?

  • NEIL BAROFSKY:

    Well, when I first took the job in late December, one of the first recommendations I made to Treasury was that they start to require TARP recipients to report on how they're using the funds.

  • JEFFREY BROWN:

    Recipients, meaning the banks that we hear about, or all kinds of institutions?

  • NEIL BAROFSKY:

    Banks, auto companies, everyone who is receiving TARP funds. The Treasury has refused to adopt that recommendation, so as a result we went out and did our own survey. And we've asked all the financial institutions as of the end of January to report to us how they're using the money.

    And we've gotten back 100 percent response rate, and we're preparing an audit that's going to report on how they indicate they've used the money. So it's a challenge.

  • JEFFREY BROWN:

    Now, this has been a continuing issue from the last administration when these bailouts began, correct? You're saying that the current Treasury still is not asking enough of where the money is going.

  • NEIL BAROFSKY:

    That's correct. This is a recommendation we've made, we continue to make. As I said, we sort of took matters in our own hands because it wasn't being adopted.

    We think it's really important. We announced this week that there's another $30 billion going to AIG, but they're not going to be required to report on how they're using that money. We think it's a problem that needs to be addressed and, in the meantime, we're going to address it ourselves.

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