Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts

of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org

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Today is August 27, 2012, and my guest is Neil Borovsky, former special inspector general for

the TARP program, and author of bailout, his memoir of that experience, Neil, welcome to

the econ talk. Thank you for having me. Let's start with TARP, which I always think of

as standing for toxic asset relief program, but the T is actually troubled asset relief program.

It was originally proposed by the Bush administration as a way to purchase so-called toxic or troubled

assets from banks to reduce the risk of some kind of financial meltdown. So give us a brief

history of TARP and how sick TARP, the special inspector general got involved, and how you

got involved. So TARP came about in the fall of 2008 when really the wheels were falling off

of the financial system, and the largest banks, largest financial institutions were suffering

these enormous losses, largely because of their exposure to certain real estate related assets.

Bonds and CDOs, the sort of complex bonds of bonds that were all tied to the American

real estate market, and as the real estate bubble popped, those assets, those troubled assets,

lost value, creating massive losses for the banks. And the original idea of TARP, as it

was sold to Congress, as Secretary, then Secretary of the Treasury, Hank Paulson, and Chairman

of the Fed, Ben Bernanke, went to Congress, they wanted to get authorization to go out

and borrow $700 billion in order to buy up from the banks these troubled assets, as we

called them at the time, toxic assets. So that was the original pitch to Congress that

...