“The Treasury Department is underestimating the costs of key parts of the government's $700 billion bank-bailout program and is failing to require recipients of taxpayer funds to show how they're using the money, according to a key inspector general overseeing the package,” reports MarketWatch.

Neil Barofsky, special inspector general for the bailout program, known as the Troubled Assert Relief Program, testified Thursday before the Joint Economic Committee on Capitol Hill.

U.S. taxpayers and Congress have been through this before with American International Group (AIG:NYSE) during Bonus-gate.

This really isn’t news to anyone paying attention.

What is news is Ken Lewis’ testimony before New York’s attorney general. In his testimony, the Bank of America (BAC:NYSE) CEO said that “Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co.” according to a Wall Street Journal report.

What’s more astounding is that this testimony happened back in February 2009.

“Mr. Lewis said the government wanted him to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses,” the WSJ revealed after obtaining a full transcript.

“Shareholders of Merrill and Bank of America voted to approve the merger on Dec. 5, and the transaction closed on Jan. 1. Bank of America subsequently reported that Merrill lost $15.84 billion in the fourth quarter,” writes CNNMoney.

And now the government is saying it plans to have a “pilot sale” of $1 billion in distressed assets by June 2009. This test will be part of the new Public-Private Investment Program that will use as much as $100 billion of Troubled Asset Relief Program funds to remove impaired assets from banks’ balance sheets, according to Bloomberg.

While this may surprise some taxpayers, the editorial director of the Taipan Publishing Group, Justice Litle, began talking about the “dubious nature of Geithner rescue plan” back in late March.

He said, “I’ve looked over the details of the new Geithner ‘rescue plan’ announced earlier this week. I’ve read everything I can get my hands on and plowed through the proverbial ‘stack o’ stuff’ pertaining to the topic.”

Justice listed three points:

• As it has been presented, there is no way this so-called “rescue plan” can work.
• If the Geithner rescue plan is implemented honestly, it is almost certainly doomed to failure.
• If the plan is an elaborate ruse, however – that is to say, a sneaky scam... a con job designed to fool the public into seeing what isn’t there and believing what isn’t true – then it just might actually work.

“The ‘public-private’ partnership is a nonstarter because honest investors have no natural compunction to throw good money after bad,” wrote Justice. “They won’t make the high bids necessary to keep the banks solvent. Dishonest investors just might be willing to buy up the banks’ bad assets at inflated prices, knowingly setting themselves up for a loss... with further knowledge that the real payoff will come later.

“The thrust of the Geithner plan is to give the private participants 14X leverage (roughly 7 cents out of every dollar). The government provides the leverage and takes liability (on behalf of the taxpayer) for the rest. That means for every dollar that vaporizes, you and I as taxpayers will pay almost 93 cents.”

“America,” Justice said, “is on the cusp, yet again, of being kidney-punched and robbed blind by the same group of smug white collar bastards who brought her to her knees in the first place, and we aren’t even paying attention.”

Other Related Topics: Economic Growth , Government Issues , Sara Nunnally , Taipan Insider

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