Monday, October 4, 2010

TARP Simplified

Here is a chart (from Fortune) showing the changing cost estimates of the TARP program, which was enacted two years ago at about the worst moment in the 2008 financial crisis, giving the Treasury Department authority to spend $700 billion to rescue banks and other financial institutions from collapse.


That's right, the much-hated TARP program is currently projected to cost taxpayers a mere $50 billion, and may even cost nothing or potentially turn a profit.  Shouldn't we be dancing in the streets at this news?  Taxpayers should be cheering one of the most successful government programs ever designed.  Everyone should be grateful that we avoided financial catastrophe that could have been comparable to the Great Depression.

One reason we are not dancing in the streets, of course, is that unemployment is still high, housing prices are still low, and the recovery is still shaky.  People do not feel much like dancing.  Another reason, as this NPR story points out, is that the truth about TARP does not seem to penetrate the preferred media narrative that the bailouts have been a failure, government is out of control, and people are in the midst of a tax revolt (even though taxes have gone down since the new administration took office).  Why is it that we can't let the truth get in the way of a good story?

There are real victims in the assault on truth perpetrated by the Tea Party movement, its financial backers, and its media accomplices.  One, quoted in this New York Times story on the success of TARP,  is Utah Senator Robert Bennett who paid the ultimate political price for his vote in favor of the TARP program:
“For those who were screaming at me — and screaming was the operative word — ‘You’ve just saddled our children and grandchildren with $700 billion,’ I said, ‘No, I haven’t.'
“My career is over. But I do hope that we can get the word out that TARP, number one, did save the world from a financial meltdown and, number two, did so in a manner that, I believe, won’t cost the taxpayer anything. And even if it did not all get paid back, it was still the thing to do.”
I wonder if any of the people screaming at Senator Bennett will now apologize; applaud him and others who supported this program for their political courage; and thank them for saving the financial, insurance, and automobile industries from collapse.

3 comments:

  1. I agree. And I find it amazing that the "liberal media" aren't jumping on these facts to celebrate the prescience of those who voted for the stimulus.

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  2. It is a sign of how much misinformation is out there that even someone like you, Alec, who follows the news very closely, is confusing TARP and the stimulus, which are two completely separate programs. But thanks for reminding me that I now have to do another post on how successful the stimulus was.

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  3. A lot of wishful thinking and "hope" went into that Fortune magazine piece; much depends on current market prices remaining high as the government swaps out debt for preferred stock in AIG. This quote says it all:

    "Treasury has said it believes the deal will allow the government to extract itself from the company over time, and that it sees a profit on the AIG bailout as possible assuming financial markets hold up and the economy doesn't take another dive."

    Uh huh. Treasury (or the suckers known as the Taxpayer) will effectively own 92% of AIG. Sweet. BTW, $70 billion is still owed by GM and Chrysler. Don't count your chicks before they hatch.

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