Tim Geithner bids TARP farewell by debunking five TARP ‘myths’: (1) That TARP cost hundreds of billions (ok). (2) That TARP was a gift for Wall St., not Main St. (hmm…). (3) That TARP was a quick fix (wasn’t it?). (4) That the banking sector is even more vulnerable now to systemic risk (?). (5) That TARP was a Republican ploy to take over the economy.
Born at the peak of the financial crisis in 2008, the Troubled Asset Relief Program expired last week, ending what was perhaps the most maligned yet most effective government program in recent memory. Despite new evidence about the low ultimate cost and positive impact of the TARP, there is still a chasm between the perceptions of the program and its overwhelmingly favorable effect on the U.S. economy.
The TARP was doomed to be unpopular from inception, because Americans were rightfully angry that the same firms that helped create the economic crisis got taxpayer support to keep their doors open. But the program was essential to averting a second Great Depression, stabilizing a collapsing financial system, protecting the savings of Americans and restoring the flow of credit that is the oxygen of the economy. And it helped achieve all that at a lower cost than anyone expected.
As we put the TARP to rest, let’s also put to rest some of the myths about the TARP.
He leaves out several points.
82% of all senior management at firms that received TARP funds are still in their jobs. Taking 10 firms and saying there have been changes ignores the facts on the ground. And the overriding fact is that they all continue to receive their million dollar bonuses courtesy of the taxpayers children and grandchildren.
He’s correct that we have 7800 banks. The vast majority of those management teams are competent and run good operations. So why in the world didn’t the government set up a resolution trust authority just like in the S&L crisis and break up the failing banks that cause the crisis in the first place???? I would have no issue with the government providing low interest lows to those entities to help them acquire the assets if needed. It would have allowed the rule of law to prevail. It would have put the losses on the backs of the shareholders and bondholders, and it would have meant that 100% of the senior management were shown the door as their firms were liquidated. It would have meant no AIG retention bonuses. Most importantly it would have meant the government wouldn’t be involved in picking winners and losers. When they are you no longer have capitalism, you have crony capitalism (at best).
He’s right to put blame on the Bush administration. He’s wrong to not point out that the Obama administration has taken the Bush decisions to a whole new level and is quickly establishing a triumvirate of politicians, bureaucrats, and financial elite that is systemically taking over the country for their own benefit.
He is derelict to choose to comment on a few points, but to ignore the overall financial situation that is being made worse every day. The stimulus package was a disaster, health care reform is a joke that only guarantees even more health care spending, and financial reform has maybe 3 good things in there…. meanwhile the real issue – Fannie/Freddie continue along their merry way… meanwhile nothing is done by the SEC to ensure the markets are fair to the small investor…. meanwhile our Congress shows they are a bunch of idiots by not even bothering to put forward a budget nor vote on what the tax rates for next year will be before adjourning to go and campaign.
TARP is/was just one part of the greatest theft in history – the politicians, bureaucrats, and financial elite stealing the future of our children and grandchildren – all done with help of what is supposed to be OUR government.