Two months ago Zero Hedge first wrote about Alan Grayson's request to the SIGTARP to audit the $300 billion in federal guarantees received by Citigroup. Neil Barofsky has taken the request seriously, and has announced that he will "examine why the
guarantees were given, how they were structured and whether the
bank’s risk controls are adequate to prevent government losses."
As a reminder here are Grayson's 6 key concerns:
1. How was the deal negotiated by Citigroup, the Federal Reserve, and
the Treasury? How does this loss-sharing arrangement benefit taxpayers?
2. What are current mark-to-market losses to the Federal Reserve in this loss-sharing arrangement?
3. What is the current cash flow from these assets? Are these asset performing?
Who should be held accountable for the reckless acquisition of a third
of a trillion dollars in assets that ended up requiring a government
guarantee? [emphasis mine]
5. Which vendors are pricing these assets, and are there conflicts of interest present in these vending arrangements?
6. Is the Federal Reserve guaranteeing assets generated from lender-induced mortgage fraud and predatory lending practices?
Among the main questions to be probed is whether Citigroup’s loans and securities
were adequately written down (unlikely) and how much of a potential hit to the taxpayers this would result in.
“If they picked a high price, the losses could be a major
exposure for the taxpayer,” Stiglitz said.
The audit will address “the basis on which the decision
was made” as well as the “process for selecting loans to be
guaranteed,” according to Barofsky’s letter. The inspector
general also will assess “the risk-management and internal
controls and related oversight processes and procedures to
mitigate risks to the government.”
And, lurking somewhere in the shadows, Sheila Bair will be waiting for an adverse finding to finally give Vikram the long overdue and much justified boot.