Among certain American patriots, the word "TARP" is met with actual physical disgust. Parents tell their children that if they're bad, the TARP monster who lives under their bed will come out at night and suffocate them (with debt). GOP presidential hopefuls have found creative ways to disavow their prior support for it "the idea was correct but the implementation wrong," or something like that in order to avoid the wrath of the tea party.
And yet the truth is that TARP the Troubled Asset Relief Program, otherwise known as the bank bailout shouldn't be a dirty word at all. On Sunday, the Treasury Department will no longer be able to use TARP money. That's okay. It has already saved the economy.
“This is the best federal program of any real size to be despised by the public like this,” said Douglas J. Elliott, a former investment banker now associated with the Brookings Institution, a Washington think tank.
“It was probably the only effective method available to us to keep from having a financial meltdown much worse than we actually had. Had that happened, unemployment would be substantially higher than it is now, the deficit would have gone up even more than it has,” Mr. Elliott added.
Okay, so it prevented an even more catastrophic financial meltdown. Still, we have a huge national debt to consider here, right? We can't just throw away hundreds of billions of dollars just because our economy is about to collapse.
[B]y mid-2009, the administration projected that TARP could lose $341 billion, a figure that reflected new commitments to A.I.G. and the auto industry.
The Congressional Budget Office, which had a slightly higher loss estimate initially, in August reduced that to $66 billion.
Now Treasury reckons that taxpayers will lose less than $50 billion at worst, but at best could break even or even make money. Its best-case assumptions, however, assume that A.I.G. and the auto companies will remain profitable and that Treasury will get a good price as it sells its corporate shares in coming years.
It turns out that the victims of TARP were not the taxpayers after all (while best-case scenarios admittedly rarely happen with regard to anything the government does, even a $50 billion loss, the worst-case scenario, is like couch change for the United States). They were the Republicans who were voted out of office because of their support for a program that earned the misplaced hatred of the tea party. Guys like Republican senator Bob Bennett of Utah, who didn't even make it onto the primary ballot this year after serving since 1993.
“For those who were screaming at me — and screaming was the operative word — ‘You’ve just saddled our children and grandchildren with $700 billion,’ I said, ‘No, I haven’t,” Mr. Bennett said in an interview.
“My career is over,” he added. “But I do hope that we can get the word out that TARP, number one, did save the world from a financial meltdown and, number two, did so in a manner that, I believe, won’t cost the taxpayer anything. And even if it did not all get paid back, it was still the thing to do.”
Crazy old Bob.