There have been lots of criticisms of the Troubled Assets Relief Program or TARP, some justified and some not so justified. From the right critics excoriate it as an unwarranted meddling with the free market at tax payer expense, and from the left it is criticized as an unwarranted rescue of wall street at the expense of main street. Nevertheless, the unavoidable fact is that without TARP or something like it, we would have seen a banking failure that could have easily plunged us into depression that would make the Bush recession of 2008 look like fun and games. As Politico’s Ben Smith notes, there is general confusion about what TARP was and what it achieved:
Polls suggest the public has only the haziest view of what TARP was. It’s often conflated – not least by politicians who voted for it and now seek to muddy the waters – with the stimulus, a piece of policy whose supporters and foes have fallen into a much more familiar debate about the role of government and public spending.
Count politicians who bit the bullet and did what had to be done, such as Missouri Senators Roy Blunt and Claire McCaskill, among those loathe bring up the topic, others such as senatorial primary contender Todd Akin continue to come down hard on the program. Akin not only consistently voted against the program, but he continues to base his conservative bona fides on his contempt for the program which he dismisses as “trash.”
However, despite its bad reputation with the no-government-instrusion-into-anything-but-women’s-health crowd, which locally means Todd Akin more than any other politician, TARP has chalked up some remarkable successes. You’ve no doubt read that Detroit’s automotive industry is beginning to flourish once again. This recovery would not have taken place were it not for use of TARP funds to rescue the failing companies. It’s possible to argue as The New Republic’s Jonathan Cohn does, that this success offers a strong demonstration of the vital role that government can play in developing a healthy economy that works for everyone:
… This success, however partial and tentative, isn’t accidental. It’s a product of hard work by public officials who wanted to do right by their citizens. … Obama and his advisers conducted extensive analysis and entertained a wide-ranging internal debate, putting policy well before politics.
Another objection to TARP has been its cost. However, the actual sum seems to dwindle year by year. The initial estimates were as high as $700 billion dollars that would be charged to taxpayers. As the financial recovery gains steam and banks and automobile companies pay back the loans that sum has diminished consideratly, currently Congressional Budget Office is estimating the cost of TARP to taxpayers to be $34 billion. Not so bad, given the scale of the disaster that was assured if nothing had been done.
Back in 2008, though, Rep. Akin did suggest an alternative to the government bailouts funded by TARP:
Akin also co-sponsored H.R. 7223, an alternative proposal, which would have increased the federally backed insurance program and empowered private investors and sound corporations to capitalize economic recovery through federal loan guarantees.
Kind of like shooting Godzilla with a peagun – and a peagun weilded by Godzilla’s parents at that. Note, though that the one part of the TARP program that did not perform as expected is the Home Affordable Modification Program which has, to date, expended only 6.6% of the funds which were allocated to the Program. The reason? It was put in the hands of just those “empowered private investors and sound corporations,” that have “refused to cooperate with the program or have tried to scam potential participants.” Expecting financial firms who, when left without adult supervision, ran amok, creating the mess, to behave responsibly when it’s time to fix the mess is not really too bright.
I’m one of the millions, and I emphasize the word millions, whose retirement savings would have been wiped out if the financial failure with which we were threatened had taken place. I’m also a former citizen of Detroit – I know what the failure of the Big Three would have meant to thousands of workers there, and I can figure out what a United States without an automobile industry would be like. Consequently, I think the $39 billion is money well-spent.
Could it have been a better structured program? Should there have been consequences for the folks who caused our problems and then got bailouts? Yes and yes – Hell yes, in fact. And we will have to keep pushing to make sure that regulators are put in place who will make sure that “to big to fail” becomes inconceivable in the future. Dodd- was a good first step, but much more good regulatory legislation will be needed.