Give TARP a Break
By Robert Samuelson
RealClearPolitics
WASHINGTON -- It isn't often that the government launches a major program that achieves its main goals at a tiny fraction of its estimated costs. That's the story of TARP -- the Troubled Assets Relief Program. Created in October 2008 at the height of the financial crisis, it helped stabilize the economy, used only $410 billion of its authorized $700 billion and will be repaid most of that. The Congressional Budget Office, which once projected TARP's ultimate cost at $356 billion, now says $19 billion. This could go lower.
You would hardly know.
Almost everyone loves to hate TARP. It's a favorite political sport of liberals, conservatives, Republicans, Democrats -- and the public. A Bloomberg poll last October asked how TARP had affected the economy. The results: 43 percent said it weakened the economy; 21 percent said it made no difference; only 24 percent said it helped, with 12 percent unsure one way or another. Commentators in newspapers from The Wall Street Journal to The New York Times disparage TARP.
Wrong.
One lesson of the financial crisis is this: When the entire financial system succumbs to panic, only the government is powerful enough to prevent a complete collapse. Panics signify the triumph of fear. TARP was part of the process by which fear was overcome. It wasn't the only part, but it was an essential part. Without TARP, we'd be worse off today. No one can say whether unemployment would be 11 percent or 14 percent; it certainly wouldn't be 8.9 percent.
(More here. LP note: Samuelson is generally considered to be a conservative economist.))
RealClearPolitics
WASHINGTON -- It isn't often that the government launches a major program that achieves its main goals at a tiny fraction of its estimated costs. That's the story of TARP -- the Troubled Assets Relief Program. Created in October 2008 at the height of the financial crisis, it helped stabilize the economy, used only $410 billion of its authorized $700 billion and will be repaid most of that. The Congressional Budget Office, which once projected TARP's ultimate cost at $356 billion, now says $19 billion. This could go lower.
You would hardly know.
Almost everyone loves to hate TARP. It's a favorite political sport of liberals, conservatives, Republicans, Democrats -- and the public. A Bloomberg poll last October asked how TARP had affected the economy. The results: 43 percent said it weakened the economy; 21 percent said it made no difference; only 24 percent said it helped, with 12 percent unsure one way or another. Commentators in newspapers from The Wall Street Journal to The New York Times disparage TARP.
Wrong.
One lesson of the financial crisis is this: When the entire financial system succumbs to panic, only the government is powerful enough to prevent a complete collapse. Panics signify the triumph of fear. TARP was part of the process by which fear was overcome. It wasn't the only part, but it was an essential part. Without TARP, we'd be worse off today. No one can say whether unemployment would be 11 percent or 14 percent; it certainly wouldn't be 8.9 percent.
(More here. LP note: Samuelson is generally considered to be a conservative economist.))
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1 Comments:
So, government sets up these 'too-big-to-fail' economic pillars, then colludes with them to reap huge dividends for the few who control these firms, then puts the taxpayer on the hook for the centralized risk these pillars represent, then bails them out when things go belly-up.
Yeah, I guess I'd say TARP worked exactly as designed.
In fact, we should do this with our entire economy so that whenever government sets up a too-big-to-fail and well-connected firm that then gets in bed with the government, we can privatize the profits and socialize the debts. What if you are not too-big-to-fail and well-connected? Well, tough cookies for you - you can go to bankruptcy.
So, who's next - General Electric? Union Pacific? Ford?
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