The American Spectator

I don’t want to criticize Ben Smith’s reporting in his piece entitled, “TARP: A success none dare mention.” The problem is not with the writer, but with the the political insiders who are trying to push this self-serving narrative: 

The consensus of economists and policymakers at the time of the original TARP was that the U.S. government couldn’t afford to experiment with an economic collapse. That view in mainstream economic circles has, if anything, only hardened with the program’s success in recouping the federal spending.

The problem, apparently, is that the public regards TARP very unfavorably, despite officials’ insistence that it has been a good program. 

There are two points that the officials and economists quoted in the piece think the public fails to appreciate. The first is that the country would have plunged into another Great Depression without TARP. The second is that TARP has proved a good deal for taxpayers. 

Regarding the first claim: if the counterfactual really were the apocalyptic scenarios posited by Smith’s sources — Alan Blinder and Mark Zandi reference 25 percent unemployment, and Smith himself invokes the image of “breadlines and catfood” — then almost any measure taken to save the banks would have been a success, by their standards. Simply wiring a few trillion dollars from the Treasury to the CEOs of Goldman Sachs, Lehman Bros., et al. would have constituted an economy-saving measure. Would they expect the public to be satisfied, and even grateful, if the government had done that instead of TARP? 

And as for the claim that TARP will turn out to be successful in recouping taxpayers’ funds, Marshall Auerback said it best: “Calling the TARP a success is like claiming your wastrel son is getting his life together because he’s settled his gambling debts, while omitting that you are paying for his apartment, got him an overpaid job at your company, and handing him $100 bills more than occasionally.”

If you are not already familiar with the numerous accounting shenanigans that go into the claim that TARP is going to be a good deal for taxpayers, I recommend the rest of Auerback’s piece, and also this post at Credit Writedowns. Briefly, simply in dollar terms it’s a bit rich to claim success on TARP when the bailouts of Fannie Mae and Freddie Mac are projected to exceed $400 billion. And even if taxpayers get back the exact dollar amount they put in, they’re getting a terrible deal, because they are not compensated for either the risk they took on or the opportunities they had to forgo in order to furnish those funds. 

Of course, the Bush administration, the Obama administration, Congress, and the banks have interest in rescuing TARP’s legacy, because it’s closely tied to their own images. For this reason, they try to reframe the TARP debate in a very narrow way, focused on recouping its outlays, to try to mislead the public. 

In broader terms, the public has it exactly right that TARP was a disaster. For the public, budgetary considerations are secondary to questions of justice and responsibility. Today the investment banks that needed the bailouts are more profitable and more concentrated than they were before TARP. If polls suggest that people think they got a raw deal — that the banks were rewarded for failing, on their dime — it seems only fair.