America’s Troubled Asset Relief Program (a.k.a. “TARP”) turns two years old this Sunday – at which point the federal government is no longer permitted to make investments from the fund.
Predictably, the Keynesian chattering classes in their government-funded corner offices are using the occasion of this anniversary to hail TARP as the savior of the free market economy, although the truth is the bailout spit in the face of everything the American free market stands (or rather stood) for.
It also did absolutely nothing to stop the loss of 8 million jobs, nothing to prevent the shriveling of Americans’ personal incomes and nothing to stem the market losses felt by those of us who didn’t receive the “too big to fail” treatment.
We opposed TARP vocally and repeatedly back in 2008 (here, here, here, here, here and here) – and with good reason. In fact, as we said on that dark day when it was signed into law by former President George W. Bush, the bailout was as “irresponsible as it is ill-conceived,” and nothing but an excuse to “use $700 billion of your tax dollars to purchase worthless ‘assets’ which were created after the government mandated loans to millions of homeowners who simply couldn’t afford them.”
Like it or not, that was the root cause of the recession, people – trillions of dollars worth of politically-correct lending – damage no bailout was ever going to undo.
Not coincidentally, at the time TARP was passed organized labor was backing Democrats to the hilt in the 2008 elections, while Wall Street was throwing its money behind both parties. As a result, a handful of union leaders and Wall Street bankers got rich … while the rest of us were left holding the bag.
Now, the Congressional Budget Office and the White House say that TARP will wind up costing taxpayers only $50-60 billion. Of course they fail to mention how the government plans on pulling $50 billion out of AIG (which is only worth $25 billion) or how they plan to recoup their $60 billion investment in “Government Motors” – which is already backing off of its original IPO target (and yet curiously contributing to politicians again).
Yeah … do we really think we’re going to get that money back? Also, not a penny of the TARP funds that are being “repaid” are going back to the taxpayers – they’re being spent on new bailouts.
Amazingly, Republicans and Democrats (who are at each others throats on everything else related to the economy these days) are generally united in their misguided belief that TARP saved the world from fiscal Armageddon – which is an interesting caveat to the “blame Bush” strategy that’s been employed with moderate success by President Barack Obama and House Speaker Nancy Pelosi (both of whom voted in favor of TARP).
Well, if you really believe that the sky was falling back in October 2008, then you simply must read this column from economist Dean Baker, which takes a sledgehammer to that argument.
TARP didn’t stop the sky from falling … it granted a privileged few a bridge over troubled waters for a short time … a bridge we’ll be paying for no matter how much government says it has “recouped” from our investment.