October 5th, 2009
02:39 PM ET

Financial Dispatch: Bailout cop says govt. set 'unrealistic expectations'

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/10/04/u.s.economy/art.greenspan.gi.jpg caption="Former Fed Chairman Alan Greenspan, shown here in 2008"]

Andrew Torgan
CNN Financial News Producer

One year after the Troubled Asset Relief Program was signed into law, the TARP’s top cop says federal officials weren't entirely honest with the public about the health of the first nine financial firms that got bailouts.

Bailout Special Inspector General Neil Barofsky says in an audit that Treasury Dept. officials painted an overly rosy picture, creating “unrealistic expectations,” when they called the first bailout banks “healthy” institutions that would be able to lend more with government help.

Separately, the new audit looks into charges that government officials strong-armed Bank of America into completing its planned purchase of Merrill Lynch, even as BofA worried about mounting losses at Merrill in late 2008. Further, the report looks into whether officials pressured BofA to conceal those losses from shareholders.

Barofsky's office was created by the Emergency Economic Stabilization Act of 2008, which established the $700 billion federal bailout program. This audit is the fourth completed so far by the watchdog in recent months, but the first that looked at how banks said they used their bailout dollars.

Greenspan says unemployment will top 10%

Former Fed Chief Alan Greenspan over the weekend joined the chorus of politicians and pundits who say unemployment will top 10%, even though he believes the U.S. economy will grow more than expected in the third quarter.

Greenspan told ABC’s “This Week” that he expects 3% growth in the third quarter, up from the 2.5% he previously predicted. However, he said that the “pretty awful” September employment report released Friday showed the jobless rate continued to climb.

A slowing or halt in job losses is different than reversing the rise in unemployment, Greenspan noted, adding that the nation's unemployment rate - currently 9.8% - is “going to penetrate the 10% barrier before heading down.”

That prediction matches previous comments by President Barack Obama and others who say that unemployment is a lagging indicator in an economic recovery.

“Gourmet” gone… “Cookie” crumbles…

“Gourmet” magazine, which has amassed a devoted following over nearly 70 years of publication, will be shut down, publisher Condé Nast said.

The magazine, introduced in 1940, is expected to close by the end of the year.

“Gourmet,” which has nearly 1 million subscribers, fell victim to a decline in magazine advertising and followed a companywide review of magazines. 

In addition to “Gourmet,” Condé Nast said it was also shuttering parenting magazine “Cookie” and two wedding magazines, “Elegant Bride” and “Modern Bride.”

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Filed under: Andrew Torgan • Bailout Turmoil • Economy • Finance
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