Members of Congress and consumer advocates expressed outrage Monday when they heard about the findings of the report.
"It shouldn't be a big surprise that a huge pot of honey attracts a lot of flies," said Tom Coburn of Oklahoma, the senior Republican on the Senate Permanent Subcommittee on Investigations, which is also examining the program. "I would guess that 20 investigations, while a good start, is only the tip of the iceberg."
"That's an appalling record," Barbara Roper, director of investor protection for the Consumer Federation of America, said of the 20 criminal investigations. "In the midst of this crisis from which they are being bailed out, the same people who created this mess are apparently still breaking the law. What is it with these people?"
In a series of recommendations, Barofsky asked the Treasury Department for greater transparency and greater fraud protections.
The Treasury Department's bailout chief, Neel Kashkari, said in a letter dated April 14 that the recommendations would be "considered."
The report underscores just how complicated the bailout program has become.
What started out in October as a $750-billion effort only to buy toxic securities has morphed into 12 separate programs that cover up to $3 trillion in direct spending, loans and loan guarantees -- an amount roughly equal to the annual federal budget.
Today, banks, insurers, brokerages, auto companies, car parts makers and homeowners are just some of the beneficiaries of the program, known formally as the Troubled Asset Relief Program, or TARP.
The report dedicated an entire section to what many experts believe is its most risky operation -- a toxic asset purchase plan under a broader program known as the Term Asset-Backed Securities Loan Facility, known as TALF. Originally, TALF was aimed at expanding consumer lending programs for autos, student loans and other types of credit.
But the Obama administration expanded TALF to include funding and federal loan guarantees to purchase toxic securities.
That program has at least two parts: one to buy up bad loans from banks and another to buy up bundled loans in the form of mortgage-backed securities from investment markets. The government would split any profits with the private investors it partnered with.
The latter has sparked greater concern because of the possibility that buyers could collude to manipulate prices and extract kickbacks, with the government taking virtually all of the risk.
"When you are buying from the market or the street, transparency comes into question," Barofsky, a former federal prosecutor, said. "The potential for pricing fixing and collusion becomes greater because the government doesn't have control or knowledge of who" all the players are.
Members of Congress, who were given Barofsky's report Monday, have already expressed concern over the plan.
House Financial Services Committee member Brad Sherman (D-Sherman Oaks), a certified public accountant, said that under the plan, taxpayers would take virtually all the risk, get zero control and only 50% of the profits.
"That doesn't sound like a good deal," he said.
"I can't imagine Warren Buffett signing something like that."
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ralph.vartabedian@latimes.com
tom.hamburger@latimes.com
