Bailout

Finished up Neil Barofsky's “Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.” I'm a big stickler for needing to understand the workings of the state and financial capitalism in the most rigorous and technical of terms, going beyond the fundamentally correct but ultimately vague tropes of “capitalists profit at the expense of workers and that's a bad thing.” As an ex-federal prosecutor for the US Attorney's Office for the Southern District of New York who worked on plenty of mortgage fraud cases, and most relevantly, the former Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Barofsky does not fail to deliver on detail.

Barofsky has a great ability to convey the most elaborate of schemes behind the 2008 recession in a manner that elucidates their nefarious elements in a way non-experts can easily grasp. For instance, a considerable portion of the book is dedicated to discussion about the TALF (Term Asset-Backed Securities Loan Facility) and the PPIP (Public-Private Investment Program), which were ostensibly designed to “unclog” banks' balance sheets by providing easy liquidity for toxic assets (e.g. subprime mortgage-backed securities) and spur consumer lending from investment institutions. As Barofsky explains, this convoluted mechanism was one of the numerous means in which banks were a) not only able to get away with not cleaning their balance sheets of these toxic assets, but b) effectively contributed to rewarding and valorizing the “too big to fail” ethos that led to Wall Street's disaster and will lead to even more in the future.

Where the most incensing parts of Barofsky's narrative emerge, however, is in his discussion of the Obama-era Home Affordable Modification Program, or HAMP. Really, this is at the core of the aftermath of the subprime mortgage crisis, and the disastrous failure of the US government in amending exorbitant or even underewater mortgage terms (that were fraudulently underwritten to begin with), letting the mortgage servicing industry administer these mortgage modifications, and the ultimate sunsetting of HAMP that returned mortgage interest rates to pre-program levels, spiking rates by over 20 percentage points in some cases, and forcing honest and hard-working families into foreclosure after doing everything right.

As I like to say, one of capital's most potent weapons against workers and families is to make the rules of the game as fiendishly convoluted as possible, and rely on the ignorance of policy-makers and the public to take advantage of all of us. Barofsky does a superb job of cutting through the technocratic morass, the alphabet soup of government and financial acronyms, and extracting for the reader the remorseless tactics of every actor in the financial sector and in the US government that led to this crisis.