The “WTF Number”

I am putting together a symposium titled, “The Financial Crisis: New Administration Initiatives and How Practitioners Should Advise Clients as a Result.” The morning portion of the program will focus on the impact of the financial crisis on corporate governance and what boards should do in the wake of the financial crisis. The program's afternoon portion will focus on financing strategies, restructuring, reorganizations and bankruptcy, and also consider board and senior management fiduciary duties in the context of financing distressed business. On a conference call to discuss the morning session, one of the panelists began to talk about the role that institutional investors should play in reforming corporate governance practices. I intended to explore this issue in my blog post today. However, yesterday I caught an NPR Marketplace story that was so astounding I need to write about the Marketplace story instead.

According to Marketplace, Neil Barofsky, the Special Inspector General overseeing TARP, reported to Congress that the financial system rescue could cost American taxpayers $23.7 trillion. Yes, that’s right, $23.7 trillion. That number was described as a “WTF number”. In case you (like me) are not familiar with the expression, “WTF number,” use your imagination, or recall the first expression that came to your mind when you heard that taxpayers may be on the hook for close to $24 trillion. Get the picture?

The number is unimaginable, although some in Congress have attempted to wrap their minds around the figure. The New York Times and ABC reported that Representative Darrell Issa of California (R), on the House Committee on Oversight and Government Reform, calculated “If you spent a million dollars a day going back to the birth of Christ, that wouldn’t even come close to just one trillion dollars . . . .”

But let’s not blithely talk about how the bailout could cost American taxpayers $23.7 trillion, and then move on. First, it is important to note that Mr. Barofsky came up with that figure by adding up the maximum costs of the approximately 50 different rescue programs, including Federal Reserve and Treasury Department programs, FDIC deposit guarantees, funds for bailing out troubled automakers, and funds earmarked for other mortgage related programs, and then assuming that all of the programs would be implemented and maxed out at the same time. Second, Mr. Barofsky explained in a report that he was calculating the worst possible scenarios. In a Bloomberg interview, Andrew Williams, a Treasury Department spokesperson, noted that the US has spent less than $2 trillion, so far.

Why did Mr. Barofsky report $23.7 trillion? Apparently, Mr. Barofsky is of the opinion that transparency and accountability is lacking with respect to how TARP funds, and other financial rescue funds, are being spent and the value of the investments. In my view, transparency IS lacking. As Scott Jagow noted on the Marketplace Scratch Pad blog, the $23.7 trillion figure in and of itself may not be a useful number. However, if Mr. Barofsky’s motivation for reporting that shocking figure was to make a point about the need to implement his recommendations—such as the recommendation to require TARP recipients to report how they use TARP funds—then I hope his point hit home on Capitol Hill. You may listen to a conversation between Mr. Barofsky and Jake Tapper, ABC News Senior White House Correspondant, regarding the most recent quarterly report from the Office of the Special Inspector General for the Troubled Asset Relief Program on ABC News’ Shuffle podcast posted earlier this afternoon.

Thank you, Mr. Barofsky.

Professor R. Burch
Capital University Law School
July 22, 2009