TARP oversight official: Bailout funds mishandled

Neil Barofsky, former special inspector general in Charge of Oversight of TARP, discusses how he says funds were mishandled on "CBS This Morning."

(CBS News) For 27 months, Neil Barofsky was in charge of policing the $700 billion Troubled Assets Relief Program, commonly known as TARP.

Now Barofsky, the former special inspector general, has written a revealing behind-the-scenes look at how, he says, the financial bailout program's funds were mishandled in a book called "Bailout: An Inside Account of How Washington Abandoned Main Street while Rescuing Wall Street." The book is published by Simon & Schuster, a division of CBS.

An appointee under President George W. Bush, Barofsky said that when he went to Washington he learned it had been "hijacked by the interests of a small group of powerful Wall Street banks."

Monday on "CBS This Morning," Barofsky said, "They captured regulators' ideology. ... What I saw with TARP, is that it went from a program that was supposed to help Main Street - reinvigorate the economy, restart lending and help struggling homeowners - turn into a program that really only served the financial elites on Wall Street."

Though Barofsky says TARP deserves credit for stopping the financial collapse of the U.S. economy, he said the program was intended to do more.

"When you think about it, throwing a few hundred billion dollars at the largest banks and trillions of dollars of other support just to preserve what is essentially a broken status quo that benefits really the financial executives, ... wouldn't be that impressive," Barofsky said.

"That's why Congress insisted and Treasury promised more, that the banks would take this money and use it to deploy it into the economy and bring back economic growth, which hasn't happened because of the way it was mismanaged. They promised -- and TARP doesn't get passed but for the promise to help struggling homeowners and the foreclosure crisis. Democrats in Congress are not going to pass that bill without that promise. And that promise was abandoned. And the reason why is, again, the interests of the bank were always put first."

Barofsky says Treasury Secretary Timothy Geithner, in particular, is to blame for the mishandling of TARP. "Among other things, he presided over, made the policy choices to put the banks before homeowners. He oversaw a policy that saw our largest banks, the too-big-to-fail institutions get bigger than ever and more powerful, more politically connected. ... Where we are in the economy today is partly the responsibility of Secretary Geithner and the bad policy choices that he has made."

For more with Barofsky, including more of his assertions as to how Geithner mismanaged TARP and ways TARP fell short for the American people, watch the video in the player above.