Belmont Club

Anything goes

As the government borrows more money (with a $104 billion record bond auction scheduled for next week) the Treasury Department has asked Justice to weigh in on how much oversight its inspector general can exercise. Jake Tapper at Political Punch has been following the controversy.

Officials of the Treasury Department admitted late Thursday that they have asked the Justice Department to weigh in on how much power they have over the Special Inspector General for the $700 billion Troubled Asset Relief Program, known as SIGTARP. The push for a legal ruling on SIGTARP’s independence came after Special Inspector General Neil Barofksy had asked Treasury Department officials to hand over documents regarding a TARP recipient, a request that was denied.

Sen. Chuck Grassley, R-Iowa, in a letter to Secretary Tim Geithner earlier this week, said that he understood the denial to have been based on “a specious claim of attorney-client privilege.”

The entire issue of oversight has been emphasized by a Chicago Tribune story reporting that two other inspectors generals have recently been shown the door. In addition to Barofsky at Treasury, Gerald Walpin at Americorps and Judith Gwynne at the International Trade Commission are alleged by a senior Republican to be in trouble for asserting their independence.

The dispute comes as Grassley, ranking Republican on the Senate Finance Committee, is looking into the abrupt firings within the last week of two other inspectors generals one of whom was fired by the White House and the other by the chair of the International Trade Commission. Both inspectors general had investigated sensitive subjects at the time of their firings. …

Walpin had led an investigation of Sacramento Mayor Kevin Johnson of Sacramento, Calif., a former NBA player and Obama supporter. Johnson started a nonprofit education program that Walpin’s office alleged had misused federal funds. In a letter sent late Wednesday to the White House, Grassley charged that a White House lawyer who delivered the news to Walpin and who was summoned to the senator’s office, “refused to answer several direct questions” about the dismissal. …

Separately this week, the International Trade Commission told its acting inspector general, who is not subject to White House authority, that her contract would not be renewed. Grassley had become concerned about her independence because of a report earlier in the year that an agency employee forcibly took documents from the acting inspector general.

The White House, for its part, called the dismissal of the Americorps Inspector General “an act of political courage”. However that may be, common sense dictates that the astronomical sums of money now at the disposal of government be watched carefully. The immortal words of Spiderman “with great power comes great responsibility” may also apply to those who handle vast amounts of money. And recently the sums have become so mind-bogglingly large that the public mind is numbed to them. William Pesek at Bloomberg, in an editorial commenting on news stories that two men traveling with $134 billion in US bonds in suitcases were being questioned by Italian customs officials, said he hoped the bonds were faked. But he added that in today’s topsy turvey world, he wouldn’t be surprised if they were real.

Think about it: These two guys were carrying the gross domestic product of New Zealand or enough for three Beijing Olympics. If economies were for sale, the men could buy Slovakia and Croatia and have plenty left over for Mongolia or Cambodia. Yes, they could have built vacation homes amidst Genghis Khan’s Gobi Desert or the famed Temples of Angkor. Bernard Madoff who?

These men carrying bonds concealed in the bottom of their luggage also would be the fourth-largest U.S. creditors. It makes you wonder if some of the time Treasury Secretary Timothy Geithner spends keeping the Chinese and Japanese invested in dollars should be devoted to well-financed men crossing the Italian-Swiss border.

This tale has gotten little attention in markets, perhaps because of the absurdity of our times. The last year has been a decidedly disorienting one for capitalists who once knew up from down, red from black and risk from reward. It almost fits with the surreal nature of today that a couple of travelers have more U.S. debt than Brazil in a suitcase and, well, that’s life. …

Counterfeit $100 bills are one thing; two guys with undeclared bonds including 249 certificates worth $500 million and 10 “Kennedy bonds” of $1 billion each is quite another.

The bust could be a boon for Italy. If the securities are found to be genuine, the smugglers could be fined 40 percent of the total value for attempting to take them out of the country. Not a bad payday for a government grappling with a widening budget deficit and rebuilding the town of L’Aquila, which was destroyed by an earthquake in April.

It would be terrible news for the White House. Other than the U.S., China or Japan, no other nation could theoretically move those amounts. In the absence of clear explanations coming from the Treasury, conspiracy theories are filling the void.

Conspiracy theories. We don’t want that, do we? Maybe we should ask the Inspector General about it.

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