Bailout politics are fraught with bitter political accusations. Just this week, Financial Services Committee Chairman Spencer Bachus released a report showing that Section 204 of the Dodd-Frank bill allows AIG-style bailouts to happen again, despite the claims of the administration. And scholarship is showing that the political influence of financial institutions, as measured by campaign contributions, was correlated with receipt of TARP funds. This makes sense – high level White House official Michael Froman, who apparently advised Obama to hire Geithner during the transition, made millions from Citigroup, the largest recipient of bailout funds and as Sheila Bair notes in her book Bull by the Horns, the least stable bank. Jack Lew, current White House Chief of Staff did as well. And Bob Rubin, a frequent below the radar advisor to Obama and mentor to Tim Geithner and Larry Summers, was the Chairman of Citigroup at the time of the bailouts.
TARP and Federal Reserve lending were correlated with political connections. But with the disposal of warrants, what Puente found is that political connections did not play a role in the valuations Treasury got when the government decided to auction them off. In fact, according to Puente, there was only one factor that mattered: Congressional Oversight Panel Chair Elizabeth Warren. It was Warren who, along with the Special Inspector General of TARP Neil Barofsky, put out a series of reports that forced Treasury to modify its process for selling the warrants. Puente noted that “warrant deals that occurred prior to the July 2009 COP report were systematically discounted.” The deals that came after were not. “With $8.97 billion in warrant deals having been completed between May 2009 and March 2011, that the COP helped Treasury get 10 percent more after publishing its report is non-trivial.”
good to see the President cozying up with all sorts of terrible people. We need Warren in Washington DC, ASAP, to make sure this crap doesnt happen.
