SIGTARP Releases Quarterly Report To Congress

Tyler Durden's picture

Some preliminary highlights from the report.

Update on TCW the whole Jeff Gundlach fiasco:

On December 4, 2009, The TCW Group, Inc. (“TCW”) dismissed Jeffrey Gundlach, a “key man” under TCW’s contract with Treasury, who served as TCW’s chief investment officer and the lead portfolio manager of its PPIF. At that time, consistentwith the terms of the Limited Partnership Agreement, Treasury froze TCW’s PPIF and halted all fund transactions.225 On January 4, 2010, TCW withdrew as a manager in PPIP. According to Treasury and TCW, TCW liquidated the approximately $500 million in securities held by its PPIF at a profit and paid back the loan from Treasury with interest. Treasury entered into a winding-up and liquidation agreement with TCW governing the liquidation and distribution of the fund. Treasury will allow TCW’s private investors to re-allocate their funds to a different PPIF of their choice. In this case, Treasury will still provide matching debt and equity investments.


During the formation of PPIP, SIGTARP recommended that Treasury adoptstrict “key man” provisions in its fund manager agreements, which were subsequently included in Treasury’s agreements. The agreements provide that the PPIF obtain the services of the personnel who were promised during the application process. As a result of these important “key man” provisions, Treasury had the option of terminating TCW’s involvement in PPIP because key personnel were no longer running the PPIF.

It appears even the SIGTARP wonders who is in charge:

In sum, Treasury did not conduct direct oversight of AIG’s executive compensation prior to March 19, 2009, but chose instead essentially to defer to FRBNY. This, coupled with Treasury’s subsequent limited communications with FRBNY with respect to that issue, meant that Treasury invested tens of billions of taxpayer dollars in AIG, designed AIG’s contractual executive compensation restrictions, and helped manage the Government’s majority stake in AIG for several months, all without having any detailed information about the scope of AIG’s very substantial, and very controversial, executive compensation obligations. Treasury’s failure to discover the scope and scale of AIG’s executive compensation obligations, in particular at AIGFP, potentially resulted in a missed opportunity to avoid the explosively controversial events surrounding the AIGFP retention payments and the considerable public and Congressional concern that followed. Although SIGTARP saw no indication that Secretary of the Treasury Timothy Geithner (the “Treasury Secretary” or “Secretary Geithner”) had personal knowledge of the AIGFP bonuses until shortly before they were paid, this too suggests a failure of communication. In light of the political sensitivities associated with the bailout of AIG, in his role both as then-President of FRBNY and subsequently as Treasury Secretary, it was necessary that Secretary Geithner be informed by his staff, in a timely manner, ofsuch sensitive and significant information so that he could have sufficient time to explore possible solutions.

On the magical inability to extract concessions out of Goldman, but doing phenomenally well when faced with GM bondholders:

Similarly, the refusal of FRBNY and the Federal Reserve to use their considerable leverage as the primary regulators for several of the counterparties, including the emphasis that their participation in the negotiations was purely “voluntary,” made the possibility of obtaining concessions from those counterparties extremely remote. While there can be no doubt that a regulator’s inherent leverage over a regulated entity must be used appropriately, and could in certain circumstances be abused, in other instances in this financial crisis regulators (including the Federal Reserve) have used overtly coercive language to convince financial institutions to take or forgo certain actions. As SIGTARP reported in its audit of the initial Capital Purchase Program (“CPP”) investments, for example, Treasury and the Federal Reserve were fully prepared to use their leverage as regulators to compel the nine largest financial institutions (including some of AIG’s counterparties) to accept $125 billion of TARP funding and to pressure Bank of America Corporation (“Bank of America”) to conclude its merger with Merrill Lynch & Co., Inc. (“Merrill Lynch”). Similarly, it has been widely reported that the Government, while arguably acting on behalf of General Motors Corporation (“GM”) and Chrysler Holding LLC (“Chrysler”), took an active role in negotiating substantial concessions from the creditors of those companies.

In concordance with data previously prepared by Zero Hedge, SIGTARP is continuing an investigation into whether GM and Chrysler dealerships were closed based on political considerations.

Automobile Dealership Closures: This audit, undertaken at the requests of Senator Jay Rockefeller and Representative David Obey, examines the process used by GM and Chrysler to identify the more than 2,000 automobile dealerships that have or will be terminated in connection with the recent GM and Chrysler bankruptcies. The objectives of the audit are to determine whether GM and Chrysler developed and followed a fair, consistent, and reasonable documented approach; to understand the role of Government in these decisions; and to review to what extent the terminations will lead to cost savings orother benefits to GM and Chrysler.

And some of the just announced investigations:

Selection of Asset Managers for the Legacy Securities Program: This audit will examine the process Treasury followed to select fund managers to raise private capital for joint investment programs with Treasury through the Public-Private Investment Program (“PPIP”). This audit will examine the criteria used by Treasury to select Public-Private Investment Fund (“PPIF”) managers and minority partners, and the extent to which Treasury consistently applied established criteria when selecting fund managers and small, veteran- , minority- , and women-owned businesses...Term Asset-Backed Securities Loan Facility (“TALF”) Collateral Monitors’ Valuation: This audit will examine the Federal Reserve’s valuation determinations used to issue loans under TALF. This audit will assess how the Federal Reserve made valuation determinations, including the role of the collateral monitor, when making decisions regarding the eligibility of the  collateral and theappropriateness of the requested loan amounts.

The BofA investigation continues:

SIGTARP continues to play a significant role in the investigations by the Office of the New York Attorney General, the U.S. Attorney’s Offices for the Southern District of New York and Western District of North Carolina, the Securities and Exchange Commission (“SEC”), and the FBI into the circumstances of Bank of America’s merger with Merrill Lynch and its receipt of additional TARP funds under the Targeted Investment Program.

The housing mortgage market is now completely controlled by the Federal Reserve:

The Federal Government is stepping in as the private sector has shed more than $1.5 trillion of mortgage assets in the past two years. Figure 3.2 illustrates this active downsizing by the private sector and the reduction in its exposure as well as some of the accompanying decrease in values due to foreclosures. In short, between net mortgage lending and existing mortgage management, the Federal Government now completely dominates the housing mortgage market, with the taxpayer shouldering the risk that had once been borne by the private sector.

The most comprehensive chart highlighting why the Fed is the new New Century:

The collapse of the GSEs:

A summary of all the artifical home price increase programs set up by the government:

59 Qualified Financial Institutions have missed one or more dividend payments on the TARP's CPP program.

HAMP trial programs started since program inception: 902,620; number permanent mortgage mods completed: 66,465.

A summary of all the PPIP managers:

  • AllianceBernstein L.P. is a publicly traded investment management firm that offers research and diversified investment services to institutional clients, individuals and private clients in major markets around the world. It has $496 billion in assets under management and employs more than 500 investment professionals in more than 20 countries.
  • Angelo, Gordon & Co. is a privately held registered investment advisor focused on alternative investing. The firm was founded in 1988 and currently manages, with its affiliates, approximately $21 billion in assets. Angelo, Gordon & Co. is partnering with GE Capital Real Estate for the purposes of PPIP asset management.
  • BlackRock Inc. is a publicly traded asset management firm and provides global investment management, risk management, and advisory services to institutional,  intermediary, and individual investors around the world. The firm has $3.2 trillion in assets under management and employs more than 8,500 professionals in 24 countries.
  • Invesco Ltd. is a publicly traded global investment management company. The firm provides investment solutions for retail, institutional, and high net worth clients around the world. With $417 billion in assets under management, Invesco Ltd. employs approximately 4,900 individuals in 20 countries; the company is listed on the New York Stock Exchange under the symbol IVZ.
  • Marathon Asset Management LP is a private alternative investment and asset management company. Marathon’s core businesses include hedge funds, structured finance, emerging markets, and real estate. Founded in 1998, the firm has more than $11 billion in assets under management and 140 professionalsworldwide with headquarters in New York City and investment offices in London and Singapore.
  • Oaktree Capital Management L.P. is an investment management firm specializing in less efficient markets and alternative investments. Founded in 1995, Oaktree Capital Management has $67.4 billion in assets under management. The firm is headquartered in Los Angeles and has more than 500 employees in 10 countries.
  • RLJ Western Asset Management LP is a newly created, minority-owned entity that is 49% owned by Western Asset Management, the fixed-income affiliate of Legg Mason, Inc. and 51% owned by The RLJ Companies, the portfolio holding company owned by Robert L. Johnson. Western Asset Management is a global investment firm, and The RLJ Companies include private equity real estate funds, a private equity mid-sized buyout fund, and a bank, Urban Trust Bank.
  • TCW Group Inc. is a private asset management firm, headquartered in Los Angeles, offering individual and institutional investors a range of U.S. equity and U.S. fixed income alternatives, as well as international investment strategies. As of September 30, 2009, TCW had approximately $108 billion in assets under management. TCW’s management has an average of 23 years of industry experience and the firm’s portfolio managers have approximately 11 years of tenure with TCW. On January 4, 2010, TCW withdrew as a manager in PPIP. Treasury has entered into a winding-up and liquidation agreement with TCW.
  • Wellington Management Company LLP is a private partnership investment advisory firm headquartered in Boston. Wellington Management has more than $506 billion in assets under management and serves as an investment advisor to more than 1,600 institutions located in more than 40 countries.

Full report:


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Anonymous's picture

I bet this report has something that will brighten my day.

tom a taxpayer's picture

Wake me when the prosecutions start.

PolishHammer's picture

you might as well never wake up


there will not be any prosecutions, either these guys will go on with business as usual or they will hang off lampposts....but there will not be a solution "within" the system.

Number 156's picture

Did anyone really think that they would take the time to read through 224 pages?

I hope they keep their epitaphs really short, because I wouldnt spend much time to read those either. I will be much too busy gathering wood to keep me warm.

Cognitive Dissonance's picture

"Did anyone really think that they would take the time to read through 224 pages?"

It could be two paragraphs short and if people are too frightened to face the truth, two paragraphs short is two paragraphs too long. What we as a nation are facing is a massively large but as yet unrealized collective Cognitive Dissonance by a population so enamoured by it's own creation myth that nothing short of starvation and war in their own back yard will force people to face the ugly festering truth.

Think about the long and tortured road you traveled to get here, slowing awakening to the filth and criminal self dealing, fighting to absorb little pieces here and there as you traveled further and further down the rabbit hole. Think about the months or years long learning curve you've overcome just to get here and then think about the average Joe, who hasn't even begun to scratch the surface.

Given a choice like that, how many people do you really think would chose the red pill of full disclosure and awakening. Do you willingly stop taking the tranquilizers and pain killers if (re)gaining consciousness means coming face to face with a filthy body covered with open sores, a mouth full of rotting teeth and gangrene setting in? I think not.

I suggest we all spend some time studying denial. The simple truth is far from simple and extremely hard to accept if it requires rejecting a world view some would die for in order to maintain. The calculation is very simple; knowledge equals responsibility. Who is going to chose responsibility? How many people want to face the fact that their spouse has been cheating on them for years or their brother is molesting his children or their father is a child rapist. Think these are exaggerations and not comparable to what we are talking about? That's because you're already wakening and most of the shock and trauma is behind you. What's it look like to those who remain asleep?  

velobabe's picture

cd, this is why stephen colbert, jon stewart & comedy central writers were created‡

Cognitive Dissonance's picture

"cd, this is why stephen colbert, jon stewart & comedy central writers were created‡"

"Truth" exposed as comedy is a wonderfully seductive drug we all partake in. It allows us to laugh at the truth, something that in reality frightens us to the bone, secure in the knowledge that since we get the joke, we aren't stupid or naive and the truth is exposed for all to see. All that and no skin off our nose, right? Now that we know it, now that everyone else knows it, now that it's exposed, someone will eventually do something about it, thus I'm no longer responsible for doing something about it. Thank God I don't have to do something about it. After all, there it is, out in the open, a laughing stock no less. I feel better all ready.

Thus the cycle of denial takes it's next inevitable turn. Warm and fuzzy in our denial, we can continue to live with the "truth" while never being responsible for the truth, never having to actually live the truth. Comedy allows us to expose the truth without ever doing anything about the truth. A public safety valve that allows us all to sleep at night without ever breaking a sweat.

Colbert's got my back. 

pros's picture

I think there is a possibility that Barofsky's material will go somewhere..

after the U.S. treasury has been picked clean and credit runs out.

the U.S. is insolvent presently, but still has credit..

first to collapse will be the PIIGS (Portugal, Italy, Ireland, Greece, Spain) and the UK-creating a huge dollar rally, then the US.


But I am curious....

as to TALF---

is Barofsky looking at CWC Capital...definitely a bunch of crooks...

or Trepp, the collateral monitor? Trepp is supposed to be clean.

by the way..

FRBNY TALF Staff is collection of old Bear Stearns and Lehman ponzi schemers.


jeff montanye's picture

even clicking on it i find the print hard to read (and probably hard to understand if i could read it).  some further analysis would be appreciated.  however the conclusion that the federal government now holds the majority of the mortgages in place of the private sector (and the bank bondholders never took any haircut at all) seems wrong and also bearish for the treasury bond, assuming more will be issued to make up for the losses yet to come on the mortgages.  does this seem right?

rapier's picture

One wonders where people like Barofsky and Warren come from?  Their professional lives a study in abject humiliation.  Universally ingnored.  Yet day after day the beaver away, producing reports for posterity one supposes. 

While the whole mess was a criminal enterprise few if any crimes were committed and certainly very very few that could be prosecuted and fewer yet that would ever garner a guilty verdict that would not be overturned.


Best not to get angry about this stuff but just to accept this is what the world wants and how the world works.  I don't think it will be a worse world, just different, as the corporate oligarchies relentlessly take over governance. 

Cognitive Dissonance's picture

"Best not to get angry about this stuff but just to accept this is what the world wants and how the world works." 

Sorry, I know you mean well but I have no intention of accepting that my lot in life is to permanently be the fucked. That's the cowards way out and just because 99% of the other wage slaves are willing to shuffle off into the sunset with a forced smile on their faces and permanent bruising in the rectal area doesn't mean I will.

But thanks for spelling it out for the other 99%. Ignorance isn't bliss unless there's a blue pill to swallow and those little babies are becoming far and few between.

Anonymous's picture

The work of the SIGTARP is commendable for its detail and its pointing out the various dots. Whether the investigative team will ever be able to connect all the dots and present a prosecutable case of criminal misconduct remains to be seen. At least we are certain today that Congresscritters will never read the report. Clowns.

Ned Zeppelin's picture

I think a criminal conspiracy to violate the federal securities laws is a fairly easy place to start.  Empanel a grand jury and see if any indictments come out. Surely there is enough here to appoint a special prosecutor on the AIG-NYFed-SEC issue, for starters.

For the record, "good intentions" is not a defense to securities fraud.  However, it's pretty evident that the protestation of "we had good intentions because we had to save the world" masks a deeper truth that is far less selfless.  Time to get the SP rolling.  This is not har to figure out.

Or, you can do what the prior poster suggests: embrace the ugly truth and call it a day. 

deadhead's picture

Agreed on a SP.  This whole Fedgate matter is a mess and it should be prosecuted.

Madcow's picture

Or, you can do what the prior poster suggests: embrace the ugly truth and call it a day.

Asset prices (stocks, real estate) are going to fall to pre-1980 levels within the next 18 months.

Take a look at Japanese asset prices. Then factor in the time compression that will come in the US.  Japan rolled over its bubble without precedent.  So now, we've got a roadmap. Inevitability will be quickly discounted and prices will correct much much faster.

This will exacerbate the parabolic increase in bankruptcies, foreclosures, lawsuits, and congressional hearings. 

Something no-one is factoring in:  As public rage against the banks, the FED, the UST mounts, could there be a major change in public policy and move to abolish the FED from within?

Either its the fault of "the system" - which could be explained away and rationalized as an out-dated technology no longer fitting for current circumstances ...

Or its the fault of a handful of bankers and financial industry insiders and regulators. As the economic brutality increases, anyone remotely connected to the financial industry will not be safe walking the streets without a few well armed goons ...

deadhead's picture

Please keep digging for the truth Mr. Barofsky.

We've got a real mess on our hands and the truth needs to come out.




fresbee's picture

A quick analysis on US GDP figures.
While the natural tendency has been to shove it under the carpet saying that the number is unreal...
I think these is some substance in the GDP number and it may well indicate that we are entering into a phase os some solid recovery last seen in 1992.

The next thing to confirm this should be a solid job report..

US GDP: The Breakdown

kurt_cagle's picture

Take a look at the mortgage reset schedule first published by Credit Suisse a few years ago.

Mortgage Reset Schedule

We are just entering the inner wall of the second wave of resets, with almost all of the significant growth in the economy due to being in what amounted to the eye of the hurricane. This doesn't factor in the massive CRE component, the rising number of municipal bond issues that are holding on by their fingernails, or the nervousness concerning the European PIIGS. No, this storm will be well and truly over by mid-2012, at which point, there may not be a lot left standing.

Eally Ucked's picture

Yes,  jobs are coming!!!! Probably in those Gov. Departments which are producing constant flood of reports, predictions, revisions, revisions to revisions, screwed up statistics and other equally useful activities. I guess check printing for unemployed is thriving, ranks of retraining counsellors advising welders how to switch to new carriers as teachers or nurses, also are growing.

We don't have manufacturing in N.America any more, we won't build too many new houses, puting up windmills somewhere doesn't require to many workers, all those Wal-marts and other retailers don't need any more associates, yes, we will start our own businesses like Express Pet Grooming, Magic Shit Removal or 22-nd Century Space Travel Agency.

Those GDP numbers - whatever we import from Asia and put in the box here and move around in the truck they count as made in USA, isn't it? 

velobabe's picture

Barofsky confirmed last week he is probing whether the Federal Reserve Bank of New York improperly limited release of information about payments to AIG.

Barofsky is also working with the Securities and Exchange Commission, Justice Department and the Federal Bureau of Investigation on the investigation into Bank of America’s merger with Merrill Lynch, the report said.


Barofsky, based in Washington, is opening a branch office in New York and satellite offices in Los Angeles and San Francisco to support the investigations. Calls to Barfosky’s toll-free hotline phone number rose 41 percent in the quarter, to 9,900, according to the report.

Anonymous's picture

According to Fox news the SIGTARP report outlines 77 possible cases of criminal and civil fraud.
Businessweek says that SIGTARP is baced in Washington and is opening an office in New York and offices in Los Angeles and San Francisco. Calls to Barfosky's toll-free hot line phone number rose 41% in Q4 to 9,900.

Joe Sixpack's picture

We need to bankrupt the current currency/credit scheme and start over.

Anonymous's picture

I'm going with B "not sufficiently intelligent" but none the less after about 7 tries to enter/remember/find/request my password and 3 or 4 days of trying here is a comment.
Nice reporting and great information.
Now where did I put that calculator?

Monday1929's picture

Yeah, I called this thing pretty well, but I can't figure out the negative numbers. Soon, I can hire a banker on work-release to do the calculations for me, and mow my lawn while he's at it.

Bubby BankenStein's picture


In the medium term, performance / valuation of Fed MBS holdings must represent a major risk for the Fed.

If the public finds out that Fed MBS programs have caused serious personal financial harm, the timeline for reorganization of the US Central Bank is likely to be accelerated.  In other words, when Americans can directly associate a degradation of their standing as a result of Fed policy, they will eventually demand change they can believe in.

It is astounding to me that ZIRP and the resulting impairment to yields on private savings seems like a non event.  Americans who have savings know for sure they are being ripped off by their deposit / borrowing spread, but just seem to accept this for what it is -> Theft.

This can only go so far before Americans have had it.  Everyone who is anyone of consequense in government and finance knows this.  The big deal right now is to delay the reckoning as long as possible.

This is likely to get messy.  Be ready.


Monday1929's picture

You are right. When they put out the "TARP" "all paid back lie", leaving out the 8 other acronyms and the cost to savers of the backstops and ZIRP, I seem to be the only one to correct that (on other sites).

Lee S.

theprofromdover's picture

Was it a co-incidence that they shafted Eliot Spitzer so comprehensively to spike his guns?

I'm sure he has the energy and appetite to get some sharp teeth into all of this.

Kayman's picture

These "great" new GDP numbers for Q4 aren't happening on the ground; must be a rounding error.

Without a manufacturing base this country is lost.

Playing with paper does not a country make.

The next declaration of war should be on the offshore banks to find out where Lloyd and his ilk, along with our bought and paid-for politicians have hidden our money.

Fear of the Dark's picture

RLJ? You know, because there are a lot of synergies between BET and RMBS.