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via  Voices of Power: Elizabeth Warren – washingtonpost.com
Lois Romano interviews Elizabeth Warren, Washington Post, October 8, 2009

Elizabeth Warren is the Chairman of the TARP Congressional Oversight Panel created by Congress to “review the current state of financial markets and the regulatory system.” Today she is interviewed by Lois Romano of the Washington Post. The interview was inspired largely by Warren’s appearance in Michael Moore’s new documentary, “Capitalism, A Love Story”.

If you think that our financial sector needs some oversight, you’ll love this interview. Warren cuts to the chase by explaining the steps the Treasury Department took to hand over large sums of cash to Wall Street without accountability for either Wall Street or the Treasury Department, who had the power to do so. Warren is a watchdog and a whistleblower. Without her panel’s investigation and reporting there would be no accounting for a very large sum of our taxpayer dollars siphoned through TARP. Here’s a piece of the interview:

WARREN: Well, I’d have to say, you know, I did an interview with Michael Moore and now I’m just astonished. I never thought I would be in 9 million television commercials, so it’s been pretty amazing.

ROMANO: There’s a wonderful moment when he asks you where the $700 billion is, and you look at him and you say, “I don’t know.” So the question is: why don’t you know?

WARREN: Well, we don’t know where the $700 billion is because the system was initially designed to make sure that we didn’t know.

When Secretary Paulson first put this money out into the banks, he didn’t ask “what are you going to do with it?” He didn’t put any restrictions on it. He didn’t put any tabs on where it was going to go; in other words, he didn’t ask. And if you don’t ask, no one tells. And so we have a system that originally put more than $200 billion into the financial institutions basically saying just take it.

ROMANO: And that money is gone. You have not been able to track where that money is?

WARREN: Well, we don’t know where the money went from the financial institutions.

The problem I’m having with the whole interview in general is the tone. Warren omits some things and emphasizes others that give the interview a anti-Big Treasury, pro-underdog slant. What she says is true, mostly, but accounting for the entire $700 Billion approved for the TARP program isn’t as mysterious as she makes it sound.

First of all, Congress hasn’t spent the entire amount allotted. Below is a great graphic that should have been included in the Washington Post interview. It is taken from TARP: Taxpayers on the hook for $200 billion from an article posted on CNNMoney.com October 3, 2009, current as of this week in honor of TARP’s one year anniversary.

Particular attention should be paid to the big blue piece of the pie, “Not yet committed”. That piece indicates that the $700 Billion figure that Warren tosses around is actually only $446 Billion. That is still a huge sum of our hard-earned taxes, but not as much as Warren would lead you to believe.

The next little bit of omission that I want to draw your attention to is the big orange piece of the pie called “Returned”. Warren never mentions, not even once, that 10 major banks and 22 smaller banks have paid back a large chunk, $78 Billion, of the money handed to them. As reported by Huffington Post back in June, 2009, Treasury approved $68 Billion in TARP money from 10 of the largest financial institutions to be given back.

Even though she doesn’t present the whole picture, the bulk of Warren’s interview is right on target and worth reading in its entirety. Her main point is about how we handed money over to the banks without any type of regulation or enforcement of policy. She says that Secretary Paulson didn’t ask AIG and others, “What are you going to do with it?”

There are opposite opinions of how the economic meltdown was handled and the value of TARP. From CNNMoney.com:

Why it was worth it: “We were presented with the worst case scenario last September: the collapse of the financial markets,” said Steven Adamske, spokesman for the House Committee on Financial Services. “For anyone worried about losing a dollar over this, let’s talk about the trillions of dollars more that would have been lost on retirement savings and the many more jobs that would have been lost.”

Others even argue that TARP’s value cannot be calculated in dollar terms.

“There are portions of TARP we’ll never see a monetary return from,” said Lawrence Kaplan, former special counsel at the Office of Thrift Services who is now counsel in the financial institutions practice at Paul Hastings. “But we’ve seen a significant economic return that is greater than just dollars.”

Why it wasn’t worth it: There are many financial sector experts who say that TARP was a mistake.

“If you get a very expensive treatment that saves your life, but you don’t sort out the underlying problem, it may not come back for awhile, but it will come and get you again,” said Simon Johnson, professor of global economics and management at MIT.

Johnson contends that the government had an opportunity with TARP to really fix what ailed the economy: Regulators could have thrown out failing corporations’ management, ensured that bad banks are less politically powerful and reformed regulation to rid financial institutions of irresponsible practices. Though the Obama administration is pushing for regulatory reform now, Johnson said the solutions don’t go far enough because there isn’t the same political will to ensure that the events of last year won’t happen again as there was during the crisis.

As a result, Johnson and others argue that it’s a false dichotomy between the bailout that Treasury drafted up and epic failure of the economy.

Read more at: http://www.huffingtonpost.com/2009/10/08/elizabeth-warren-the-midd_n_313798.html

Read more at: http://www.huffingtonpost.com/2009/06/09/tarp-repayment-treasury-s_n_213065.html

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