A Fighting Chance

Easy: We decided to make it clear just how completely Treasury had ignored COP’s oversight questions.

For our second report, we made a table. We put each question from the first report in one column, wrote Treasury’s answer to that question in a second column, and then added our own comment in the third column. If Treasury hadn’t responded to a question, we wrote “No Response” in the second column. In the end, out of ten questions, Treasury gave no response or only partial responses to all ten. As we filled in “No Response” over and over, I could hear the BS whistle loud and clear.

Once again, it was about keeping it simple. The report was like a grocery list—here’s what we asked for, here’s what we got. People could see for themselves exactly how Treasury had blown us off.

Congressman Hensarling dissented from this report as well. But by now we had another Republican on the panel, former New Hampshire senator John Sununu, and he joined the three Democrats to make it a bipartisan report.

After all those years of fighting for families in bankruptcy—and all those years of hardly anyone paying attention—I guess deep down I expected that our second report would be ignored. It wasn’t. People knew what was at stake, and the financial crisis had put the bailout at center stage.

Media coverage for the new report started early in the morning of January 9, 2009, when I appeared on Good Morning America. I talked with more reporters as the day rolled on, and I did interviews on ABC, CNBC, and CNN. Several news outlets came down hard on the Treasury Department. The Boston Globe put it this way: “If taxpayers are spending billions to bail out banks, they deserve to know how that money is used.” (Go, Globe!)

The watchdog barked, and the public paid attention. But still we heard nothing from Secretary Paulson. He left his job as secretary of the Treasury less than two weeks later. No meetings, no phone calls, no meaningful response to either of our reports.

Don’t Tell What’s Really Going On

The second report was out, and COP was already hard at work on the third. By now we’d hired Naomi Baum to serve as executive director for COP. Although I knew very little about getting things done in Washington, Naomi knew Capitol Hill inside and out. She was tiny, barely five feet tall, but no one got away with underestimating her strength. Naomi had spent nearly twenty years working in Washington, and she brought calm confidence to our chaos. She got us out of the business of all-nighters, organized our operation, and hired staff. Now COP could begin multiple investigations at once; we could walk and chew gum at the same time.

Damon had an idea, and it was a big one: Let’s dig into whether the public got a fair deal on the TARP investments. The idea was to take a closer look at the price when the Treasury Department handed billions of dollars to the megabanks in return for bank stock. Secretary Paulson had told the public that all the transactions were at or near par, which meant that when taxpayers put in $100, the value of the shares they got back was also $100.

What Secretary Paulson described sure sounded like a fair deal, and we could have stopped there. But we were the COP on this beat, and Damon figured we should check out the numbers for ourselves. So COP hired a first-rate investment research firm to analyze the transactions. And then we got two separate panels of experts to check and recheck their work.

When we met to review the numbers, our experts passed out thick reports laden with pages and pages of numbers and technical explanations of their analysis and their findings. Their conclusions sent a chill through me.

Treasury had overpaid—and not by just a little. In the bailout deals with the ten biggest banks, every time Treasury spent $100, it received assets worth just $66. By January 2009, that already added up to a $78 billion shortfall.

Treasury was subsidizing these banks, pure and simple. Treasury had said one thing in public and then had done something very different in private. The BS whistle was screaming.

As it turned out, the government eventually recovered the money it put into Citibank and the other banking giants. But at the time those deals were struck, no one knew what the future held, and the risks were all on the taxpayers. All the American people had to go on was what Secretary Paulson had told them. And what he said simply wasn’t true.

Democracy had just taken another brutal punch in the gut.