A Few Words on Bailouts [ by Michael T] [News You Can Abuse]
April 21, 2010Yesterday, we premiered our new podcast “Trust,” where we talk about how Americans no longer trust Wall Street and government. A big part of this is the misconception of the TARP program and its uses, which were expanded from just rescuing banks to GM and Chrysler. Of course, fact is TARP worked and it was not the financial sinkhole critics make it out to be.
The erroneous conception floating out in the country these days is that the government has got its fingers in too many pies - from owning GM to propping up AIG. This is especially relevant as the Senate this week debates the Financial Regulation bill, which is predictably split along partisan lines.
However, the thing that is not bandied about is the simple fact that TARP worked. The big banks did not fail and indeed we, the taxpayer, made a profit as the banks paid back the Federal government with billions in interest. We do still have a huge % ownership in Citibank that was converted to stock - the Fed is preparing to sell that off based on the current stock market, in which Citi is up over 30%. Again, the program worked. Granted, AIG is a basketcase and we won’t see all the money back from that and GM is still shaky - though today they announced repayment of over $6 billion in loans with $45 billion still owed. But the end result has been an estimated $127 billion loss - not bad for a program that stopped us from going into financial meltdown.
Any politician running on an anti-bailout platform is just an idiot and should be called out as such. Any tea bagger who protests more government bailouts is an ignorant fool who does not understand basic economics. Democrats should seize on the successes and beat back anti-Federal government loudmouths as not knowing what they are talking about. The economy was saved thanks to TARP - no it wasn’t perfect, but we should acknowledge that it did its job.
Of course, the financial regulation bill being debated has also stirred up talk about future government bailouts and on this the Dems are right on point. They want a fee on liabilities assessed so that bailouts come from a fund, not the taxpayer. That plays to the mood of the taxpayer right now and is clearly why Republicans are starting to blink. They have pals on Wall Street, but Americans have a lousy view of stock peddlers these days. Let’s hope we get a strong bill that protects consumers and taxpayers. Better late than never.
(1) Comments •
Couple of points to note:
First, the outstanding liability of $127 billion from the bailouts of 2008-09 is already less than the $150 billion we lost from the S&L debacle back in the Reagan Administration (and far less than that in inflation-adjusted $$).
Second, we have a history of making money in these situations when putting up taxpayer $. Recall the first bailout of Chrysler during the Lee Iacocca era. And why is it that we make $? Because we’re buying at the bottom of the market.
So it’s a great deal for taxpayers all around. We stabilize the economy, prevent depressions, and make a profit. Hell, the world owes us for this, and our market intervention is far more effective, cheaper, and more popular than military intervention could ever be. It’s almost enough to make me oppose financial regulatory reform so that we can do it all again. Hey, if bankers can rip us off, why can’t taxpayers return the favor?
Posted by James Linkin on 04/27 at 04:51 PM
