Yesterday, Terry Gross interviewed Elizabeth Warren (who always reminds me of Barbara Bel Geddes in Vertigo, anyone else pick that up?), the Harvard law professor who is the chair of the Congressional Oversight Board on the TARP on Fresh Air.
During the interview, Warren explains how Paulson willfully deceived the board about the deal obtained on shares purchased on his watch:
Prof. WARREN: And he said the investments we’re making are at or near par. And all that means is for every $100 we put in, we’re getting back shares of stock and warrants, which are for future stock, that are worth a $100...And we did the analysis and what we discovered was that for every $100 we had put in, we got back $66 in value. Now that’s $66 as of the minute of the transaction, that’s not the subsequent decline in stock markets.
Terry asked Elizaebeth whether she saw any difference between how the TARP was unfolding under Obama vs. under Bush.
The answer, in so many words, was hooray for Obama for transparency, but in other respects, such as how the momeny is being spent, we don't know yet.
transcript below the fold
Here is Terry's question:
GROSS: The bailout program was begun in the final days of the Bush administration and now in the early days of the Obama administration. The Obama administration is adding money, making some changes. Do you see a big shift in approach between the Bush administration and the Obama administration’s approach to the bailout.
Prof. WARREN: Yes and no. (continued below)
Here is the transparency part. Notice how she limits the scope of "real change."
The yes is that Secretary Geithner clearly has gotten the message on transparency, accountability. The very first thing he did after he became secretary is that he started putting documents up on the Web site. He started holding press conferences saying, I’m going to make this information more available. So, it changed. He also said, in announcing how the second $350 billion is going to be spent, that they were going to be somewhat more restrictions, it’s a little more complicated formula, in fact we’re just trying dive in and figure out what the formula is. So, in that sense, yes I think there has been a real change. The larger question is a harder one and for that you have to pause.
And then her take on Geithner:
Henry Paulson announced at least two plans in quick order of which, you know, he dropped the first one, went to the second one, then didn’t follow the second one, as we showed when we did the actual financial analysis of what he did - done. There was no overall strategy that indicated that he ever got his arms around what the problem was. Indeed, if you simply look at it from the point of view of what he actually did, it’s not clear that he ever even understood the magnitude of the problem. Now, we come to a new secretary and so we are waiting to hear.
Does he really have his arms around this? Is there - are we going to keep taking these incremental steps and they’re going to be you know, higgledy-piggledy in lots of different directions and no clearly developed overall strategy? Or is it the case that we’re going to get an announcement about how it is that he’s got something that shaped and that’s really going to make sense here and get us to bottom of this problem? And on this very day, the day that you and I are talking, I don’t know the answer yet.
Got that? As of yesterday, after six weeks of an Obama administration and a major announcement by Geithner of what his plans are and many follow-up interviews, Warren is still looking for an announcement that suggests that suggests that the Paulson era chicken-sans-head variety panic is no longer with us.
She hasn't seen one yet.
Warren is measured in what she says, which may have to do with the position she occupies as Chair of the Oversight Board, but it's clear that she has seen nothing from Geithner yet that suggests that there has been real change in terms of how we are spending taxpayer dollars to stabilize the financial system.
And that's a cryin shame.
And on my way out the door (I know it will be hitting me in the ass), get a load of this:
GROSS: Does the Obama plan have any suggestions of how to deal with those mortgages that have been securitized, where you can’t just go to your bank who gave you the mortgage and talk to them?
Prof. WARREN: Yes, the do. It’s called a bribe.
(Soundbite of laughter)
GROSS: Did you say it’s called a bribe?
Prof. WARREN: Yes. Uh-huh. A bribe. They use a nicer word than this, but the Obama plan says we’ll offer cash incentives to servicers who will do the renegotiations.
I mean, look. I give the Obama team credit. They simply acknowledge the reality, and the reality is you’ve got this group in the middle, and they can hold the works up. So the Obama plan gives them cash incentives - you know, $1,000 for renegotiating the mortgage, more money on down the line if the thing continues to pay off - in order to get the servicers to do the thing that’s best for both the investors and for the homeowners.
And the rationale is, well, it takes more time for them to do a work-out than it does to push something into foreclosure. But the bottom line is that there are only two ways you can get the servicers to do this: One is you can bribe them, and the other is you can make them. And the Obama administration is trying the bribe.
Timothy Geithner, will you please GO NOW? (apologies to Dr. Seuss)'
BTW I would post a link, but you actually have to buy these transcripts, so it's not possible.