-
Farewell to the Spectator
December 16, 2011 | 8 comments
-
Tentative Praise for Ryan’s New Bipartisan Medicare Plan
December 15, 2011 | 3 comments
-
The Day Ahead: Thursday, December 15
December 15, 2011 | 0 comments
-
Examiner for Romney, National Review Against Gingrich
December 14, 2011 | 39 comments
-
Paul Ryan to Introduce New Medicare Plan with Democrat Ron Wyden
December 14, 2011 | 4 comments
The Spectacle Blog
Today Princeton economist and former vice president of the Federal Reserve Board Alan Blinder has an op-ed in the WSJ, with the jump headline “Bernanke and Obama saved the economy,” arguing that TARP, the stimulus, and the Fed’s “stress tests” of the big banks in early ‘09 saved the world economy from complete disaster, and that we should be thankful:
So the next time you see Chairman Bernanke, congratulate him for threading the needle. And the next time you see members of the House and Senate who voted for TARP and the stimulus package, give them a hug and say thank you for taking two monumentally tough votes that helped keep us from falling into the abyss.
What could be the justification for this homage to the powerful? Setting aside the stimulus and the stress tests, here’s Blinder’s explanation of why we should be so thankful to Bernanke and Obama for TARP (no word, by the way, why Blinder credits TARP to Obama and not to Bush, who signed it):
TARP must be among the most reviled and misunderstood programs in the history of the republic. Voters are clearly appalled by the idea that their government spent $700 billion bailing out banks.
The only problem is: It didn’t. Even if we count insurance giant AIG as a bank, no more than $300 billion ever went to banks. TARP’s total disbursements, including the auto bailout, never reached the $400 billion mark. The money went for loans and to purchase preferred stock; it was not “spent.” In fact, most of it has already been paid back-with interest and capital gains. When TARP’s books are eventually closed, the net cost to the taxpayer will probably be under $100 billion-far under if General Motors ever repays.
Spending perhaps $50 billion of taxpayer money to forestall a financial cataclysm seems like a bargain. Yes, I know it’s maddening to hand over even a nickel to bankers who don’t deserve it. But doing so was a necessary evil to save the economy. Think of it as collateral damage in a successful war against financial armageddon.
Blinder is absolutely right about the technical costs of TARP. But TARP’s books do not include all the information about the costs of the bailouts. For instance, shouldn’t Fannie and Freddie, which together have propped up the market for the kinds of toxic assets for which TARP is named, be included in those costs? So far taxpayers have shelled out $145 billion for the two, and are on the hook for many billions more — at least twice that much, according to the CBO. And that’s not to mention that the reason that most of TARP “has already been paid back-with interest and capital gains” is that the Fed has subsidized the big banks’ revival with ultra-low interest rates, allowing them to borrow short money for next to nothing and buy higher-yielding, longer-term Treasurys at low risk.
The real reason, though, that no one should hug any official for passing TARP has to do with more than dollar costs. TARP is a political economy disaster: thanks to TARP, the big banks are bigger and consolidated, more profitable, and more influential than before. TARP advanced the interests of the rich and connected over everyone else such that now, right after the biggest financial crisis in 70-plus years, the government is still not able to enact regulation that would ensure that banks don’t become too big to fail again. TARP undermined the rules of capitalism and stoked peoples’ suspicions that the game is rigged and that the rules of free markets — most importantly that you fail if your competition does your work better than you — don’t apply equally to everyone. TARP did a lot to help out the powerful at the ordinary taxpayer’s expense; the powerful don’t need any hugs or thank yous for it.
View all comments (8) | Leave a comment
More Blog Posts by Joseph Lawler
http://spectator.org/blog/2010/06/16/blinders-insider-narrative
Follow us:
ADVERTISEMENT
SPONSORED LINKS
FLASHBACK TO: 1995
-
Pope Culture
A man of faith in a godless age is hitting Americans where it hurts.
-
Why the GOP Does Not, Like, Totally Suck
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
-
Dames at Sea
-
In the Absence of Guns
In Britain, defending your property can get you life.
-
The Metaphysical Martini
-
Counting the Costs of Clintonism
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
-
Chuck McHagel
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
-
The Legacy of Old John and Mother Fresh-Roasted
-
It’s the Best Time of the Year
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
-
The Bush Crack-Up
Was the President done in by the economy, or by the politics of the economy?
Clip of the Day
ADVERTISEMENT
joe hohmann| 6.16.10 @ 5:27PM
Blinder comments that the majority of Tarp funds have been paid back. Where has this "money" gone?
Robert| 6.16.10 @ 6:58PM
When you hear anyone say that they have "paid back" the government for a bailout, ask yourself, "where did they get the money to pay it back"? Oh, that's right. They got it from the consumer. Have you noticed all the fees and rates going up at all your financial institutions? Have you noticed the banks are borrowing at zero, and loan out at a much higher rate? These mismanagers are still at the helm for the next collapse.
David Watkins| 6.16.10 @ 7:37PM
We must understand that anytime the government and any business/organization come together to support something or to "save the day" you can be guaranteed two things:
one, the taxpayer will be screwed somehow, and
two, the consumer will be screwed somehow. Guess what? We're doubly screwed (ethanol and green energy comes to mind also).
Tim*| 6.16.10 @ 8:20PM
The Myth of Too Big To Fail.
" We suggest that the seizure of Fannie Mae and Freddie Mac (FF) by the government cannot help the housing market or the economy. Most people hold the mistaken view that the government has extra real resources that can be used in emergencies. This is erroneous. The government is not a wealth generator; it can only consume and redistribute real wealth. What is needed to revive the economy is a growing pool of real savings."
Acynic| 6.16.10 @ 9:06PM
Blinder, like the vast majority of economists is clueless. All the economic "experts" are now popping out of the woodwork to explain why and what happened and to comment on the efficacy of the "bailout" plans.
You will note, that NONE of these economists (with one or two exceptions) saw this mess coming, notwithstanding their Nobel Prizes in economic "science" and their PhDs from Harvard, Princeton, Columbia, MIT, etc. They were absolutely clueless. Even the govt. of Iceland - now bankrupt - hired the prominent Columbia U. economist Fred Mishkin to study the practices and stability of the Icelandic banking system. He proclaimed all was well. Within two years (or less ) of his report, the Icelandic banking system imploded and rendered the country of Iceland BANKRUPT. GO MISHKIN !!!
These idiots are still arguing about the who,what, where's of the the Great Depression !!
Economics - the ultimate CARGO CULT SCIENCE - a notion developed by a real scientist Richard Feynmann, a Nobel Prize physicist.
Economic theories cannot be subjected to controlled experiments, so there is no way to prove any of their theories, regardless of their mathematical underpinnings. In fact, when economic theories are actually applied, they normally do not work or actually produce the opposite of what was intended.
Economic "science" is a joke, a farce, a fraud.
JP| 6.17.10 @ 9:16AM
I read the op-ed yesterday, and I believe Dr Blinder was just trying to help the administration. As Mr Lawler reminded us, it was Paulson and Bush who were responsible for TARP (with a huge assist from McCain). President Obama did sign TARP II, but it was already passed in Congress when he was inaugerated. Outside of the unpopular Stimulus package, Obama has done nothing positive vis-a-vis the economy. Blinder attempts to spin this into something positive.
martin j smith| 6.17.10 @ 10:46AM
I am not an economist, but for whatever it is worth, this is my take. GWB claimed he is trying save the free market with anti-freemarket measures. He was lying ( as did a great deal during his administration ) Obama is being supported by Liberal Institutions such as Princeton and so any economist who supports Obama is suspect from the get go. Obama is an even bigger and better liar than GWB about the economy. In fact I think that he is so fluent in lying that even I could do that. Next, What is good for Big Business is not necessarily good for America in fact very often it is not. It is small business that is good for this country. What I see quite clearly is a bad case of crony capitalism. Looking at AIG,Goldman Sachs, various banks and other insititutions--they--or many of them--donated hundreds of thousands of dollars to what party ? The Democratic Party. This was a case if insider trading so to speak--the bet on the winner who they knew it would be in advance. Meanwhile the regular guy or gal pays for this. That is how I see Tarp,Barp, and Farp.