Top gov't watchdog over $700B bailout to resign

WASHINGTON – The government's top watchdog over the $700 billion financial bailout said Monday that he will step down next month, after leading an office that uncovered millions of dollars in fraud among potential recipients.

Neil Barofsky said in a letter to President Barack Obama that he will leave this job as special inspector general for the Troubled Asset Relief Program on March 30. A spokeswoman says Barofsky believes the office met the goals that he laid out for it: deterring fraud, improving transparency and overseeing the government's management of the bailouts.

Barofsky led investigations that resulted in 14 criminal fraud convictions of bankers. The office's enforcement staff followed leads from a tip line Barofsky set up and from banks' applications for bailout money. It was the only watchdog overseeing the bailout that had law enforcement authority.

His office saved taxpayers $553 million by recognizing fraud at Colonial Bank and halting the Treasury Department's plan to send the bank money. Colonial collapsed months later. It was the sixth-largest U.S. bank failure.

Barofsky criticized both the Obama and Bush administration. He blasted Treasury Secretary Timothy Geithner and his predecessor, Henry Paulson, in a series of audits of the bailout fund, which was created by Congress in October 2008. The audits examined issues such as Geithner's role in the rescue of American International Group Inc. and the department's decision to close of thousands of auto dealers.

Barofsky's audits often prodded Treasury to make its bailout decisions more transparently.

The office also grabbed headlines during the crisis by emphasizing the worst-possible outcomes of decisions that it criticized. For example, Barofsky wrote in mid-2009 that the government's support programs totaled $23.7 trillion. That number represents the maximum size of 50 separate programs related to the crisis and the recession. It was not an estimate of possible losses.

White House spokeswoman Amy Brundage said in a statement that Barofksy "provided strong oversight of the TARP program for the past two years."

"We are grateful for Mr. Barofsky's service," she said.

Barofsky's spokeswoman said Barofsky's top deputy, Christy Romero, will become acting special inspector general next month. Romero formerly was an enforcement lawyer with the Securities and Exchange Commission.

Barofsky is a former federal prosecutor who was nominated by President George W. Bush in November 2008. He was confirmed unanimously by the Senate the following month.