At various points in the financial crisis, former Treasury Secretary Henry M. Paulson Jr. publicly discussed the health of the banking sector.
As it turns out, many of the things he said were false. The ad hoc way that monies were doled out also comes under fire.
These were not forecasts about the future that went awry, but rather, misstatements of facts regarding the solvency and capitalization of individual banks (NYT):
“The inspector general who oversees the government’s bailout of the banking system is criticizing the Treasury Department for some misleading public statements last fall and raising the possibility that it had unfairly disbursed money to the biggest banks.
A Treasury official made incorrect statements about the health of the nation’s biggest banks even as the government was doling out billions of dollars in aid, according to a report on the Troubled Asset Relief Program to be released on Monday by the special inspector general, Neil M. Barofksy. . .
Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy.”
CNN/Money adds:
Bailout special inspector general Neil Barofsky says in an audit that Treasury Department officials painted an overly rosy picture, creating “unrealistic expectations,” when they called the first bailout banks “healthy” institutions that would be able to lend more with government help.
We will see if this political storm blows over, or if this is a scandal that has legs . . .
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Source:
Report on Bailouts Says Treasury Misled Public
LOUISE STORY
NYT, October 5, 2009
http://www.nytimes.com/2009/10/05/business/economy/05bank.html
Bailout cop: Treasury set ‘unrealistic expectations
Jennifer Liberto,
CNN/Money, October 5, 2009: 6:55 AM ET
http://money.cnn.com/2009/10/05/news/economy/bailout_report/index.htm
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