Friday, September 17, 2010

TARP, yell if you want, but it saved our financial butts.

The (I'm a little) Teapot Party faithful love to rail against the TARP program, against the Bailouts, against most everything actually. It's misplaced anger that will do nothing, as Mr. Drum says, to actually address the ongoing mess that is our financial system.

The TeaPotties are, in fact, helping the tycoons on Wall Street continue their mad hatting and double dealing. We're all angry, but my anger includes the deluded and vengeful Tea for Two's who are only promoting and encouraging the very thing they are most upset about.

TARP was and is a good deal.

Amplify’d from

TARP, the Tea Party, and Me

— By Kevin Drum
| Fri Sep. 17, 2010 3:00 AM PDT

What was I doing two years ago? Well, according to my blog, on September 29, 2008 I was "consumed with a debilitating combination of fury and despair." Why? Because following two weeks of unprecedented financial meltdown, the House had just rejected Henry Paulson's bank bailout bill, the Troubled Asset Relief Program.

But what happened? Even though it was proposed by a Republican president, supported by a Republican treasury secretary and a Republican Fed chairman, and backed by the Republican leadership, two-thirds of House Republicans voted against it.

After the House voted down TARP the Dow Jones plunged 400 points in ten minutes. By the end of the day $1.2 trillion had been lost on U.S. exchanges and regulators were rushing to try to sell off Wachovia, the biggest bank yet to fail. That finally got the attention of GOP backbenchers, and a few days later a revised TARP bill (stuffed with some extra goodies as bribes) was passed. Markets relaxed and everyone breathed a little easier.

To this day, tea partiers remain convinced that it was both unnecessary and a vast black hole for taxpayer money. Neither is true, but the tea party view is now so pervasive that, as Ben Smith reports, politicians of both parties consider TARP the new third rail of American politics:

And the cost of TARP? CBO estimates the government will make a profit of $7 billion from the bank bailouts (though it may still lose money on GM and Chrysler, which were also rescued with TARP funds) and it now looks like AIG will pay back all its bailout money too. Bottom line: the ongoing recession caused by Wall Street's reckless behavior has cost us a bundle. But TARP itself? Its net direct cost is zero, and when you include the fact that it almost certainly saved the banking system and softened the recession, it may boast the biggest bang for the buck of any bill ever passed by Congress.

The tea parties will eventually pass into the dustbin of history, I suppose, but in the meantime TARP's fortunes certainly haven't made me more confident that our government can do the things it has to do. Instead, TARP turned out to represent the outer limit of what our government can do, and that was just the bare minimum to avoid catastrophe. We deserve better than that.Read more at

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