Was TARP a Good Idea?

This just in from Bloomberg BusinessWeek: “TARP’s bank bailouts are turning a profit and TARP overall may cost about $50 billion, hardly the boondoggle many pols charge.”

BizWeek says that the $700 billion plus rescue package may end up costing less than one-tenth its original price tag.

Bloomberg data says that of $250 billion to bank bailouts, the same about is expected to be repaid with profits to the government of about $16 billion.

Eighty-two billion dollars was paid to auto makers. About $55 billion is expected to be repaid with losses to the feds of $27 billion.

American International Group, the insurance and financial too big to fail, got $70 billion. It is expected to repay up to $70 billion with losses of zero to $10 billion.

Thirty billion dollars worth of housing bailouts will not be repaid as that was not the original intent.

But you get the idea. Like many bloggers, I was scornful of TARP. But I did have to research other bailouts in other countries’ financial crisis and sometimes bailouts are the only way to go.

If all of this is true, The Right Rev. James A. Bacon had better start writing another book. This one should not have the preachy, negative “lack of personal responsibility” theme of the first.

Peter Galuszka

Full disclosure: I wrote and was an editor at BusinessWeek for 15 years before it was bought by Bloomberg

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12 responses to “Was TARP a Good Idea?”

  1. Anonymous Avatar

    Mr. Gooze:

    Wash Post has a good summary of the reprot by VP that says the same thing.

    A good investment and almost not hit of any fraud.

    There is also in today's WaPo the second article on the Alaska Native American Corps $26 B no bid contracts in Bush era.

    An indication of the problem with BIG govt?

    Not the problem with BAD govt.


  2. Larry G Avatar

    If we had done what the Republicans and Tea Pots were saying – we would have let the auto companies go including FORD who would have been sucked into the abyss as the suppliers went under.

    Thousands of community banks would have failed and FDIC would have been threatened.

    We would have seen unemployment of 20-25% lasting for 5-10 years.

    but no matter… the TARP was BAD BAD OBAMA – the "socialist" who wants the govt in charge of the auto companies and banks.

    What do you want to bet that the right wing blather machine – does not find this story worthy of coverage?

    The right-wing BLOGs will sashay past this disconcerting news or still insist that even though the govt gets it's money back that the TARP was "unnecessary".

  3. Lloyd the Idiot Avatar
    Lloyd the Idiot

    First of all, Larry, TARP was a Republican creation and was passed when Bush was still in office. Second, it was brilliant. It stabilized the world markets at a time when interbank lending had completely frozen up. Without it, the recession would have far surpassed the Great Depression without any doubt. Also, don't confuse TARP with the auto bailouts. That's a horse of a different color – and that bailout was ridiculous. It favored no one but the unions.

  4. Gooze Views Avatar
    Gooze Views

    The auto bailous did involve TARP money.
    Peter Galuszka

  5. James A. Bacon Avatar
    James A. Bacon

    Peter, When I write the next book, do you promise to read what's in it before making snide comments about it?

    Here's what I said about TARP in "Boomergeddon":

    "Among the major U.S. stimulus actions, TARP seems to be faring the best. The capital infusion into the banking system helped prevent a meltdown of the financial system. Now private capital is replacing public capital, as originally intended. As of mid-February, $170 billion of the $240 billion Uncle Sam had invested in the banking system had been repaid, and there was a reasonable expectation that billions more would be in the future. In more good news, the U.S. Teasury announced that it expects to spend only $550 billion of the $700 billion authorized. Repayment of TARP money is a blessing for the taxpayer — it is money that will not be added to the deficit." (Page 172.)

  6. Lloyd the Idiot Avatar
    Lloyd the Idiot

    Gooze, the orginal TARP did not envision auto bailouts.

  7. Groveton Avatar

    Lloyd the Idiot is very badly named. TARP is not the same as the stimulus. Republicans like John Boehner voted in favor of TARP.

    Liberals and Democrats are now trying to blur the distinction between TARP and stimulus. The fact that the auto bailout was inappropriately added to TARP (by Bush) does not diminish the fact that TARP was a financial liquidity measure while the stimulus was a naked vote buying scam.

    The TARP vote was Oct 3, 2008. Not only was Obama NOT president, the election in which he was elected had not yet been held.

    Unfortunately for the Democratic disinformation machine, the record is clear:

    TARP = Bush

    Stimulus = Obama

    If you don't believe me, just look at the voting record of John Boehner.

  8. "If we had done what the Republicans and Tea Pots were saying – we would have let the auto companies go including FORD who would have been sucked into the abyss as the suppliers went under."


    Almost exactly what one of my tea party buddies said to me recently,and he went so far as to say that the previous chrysler pailout was a mistake—proven by the fact that it ultimately went under. Never mind that it saved a lot of jobs for 20 years.

    And I have to say, again, that here in Arizona antipathy to almost any thing government does runs raqmpant. These people seriously believe that we would have less crime and our communities would be more peaceful if everyone was armed and carrying.

    A recent news story was about someone who had a home invasion and shot the intruder. That is their mantra about how things should go, and worse than that, they beleive this is the rule rather than the exception.

  9. These people believe that terrorists are flooding across the Mexican border, despite the fact that of all the terrorists actually arested, zero came through Mexico: they cam through Miami, New York, and LA, plus the one caught on the Canadian border.

  10. Apparently, these people don't wan't the government to do anything–except enforce the border, enact trade barriers, and enforce strong social norms.

  11. What I can't understand is why the Democrats have not reacted strongly, and pulled out all the stops to show the Republicrazies, once aqnd for all that the majority of people do NOT support such exteme views.

    Maybe I'm wrong and a majority do now think this way, but it sure seems as if the Dems have simply retreated from a withering volley of complete nonsense, which is nothing more than clever PR paying Glen Becks multimillion dollar meal ticket.

    Some businesses and bars routinely show Faux News in their lobbies and taverns. With enough exposure, this becomes a self-feeding propaganda machine, not so different from the continual political pep talk in 1984.

  12. Gooze Views Avatar
    Gooze Views

    But you also wrote in the book:

    "While the Obama administration has pumped incalcuable sums into the housng sector via Freddie, Fannie, the FHA, TARP and the Federal Reserve, it is not clear that prices have hit bottom."

    Question. What are 'incalcuable sums? How much? Have prices not hit bottom?

    "Tarp and ARRA were sold to the American public as one-time expendtirues. But once the funds are distributed, the programs create new constituencies that hire lobbyists and donate to political campaigns with the goal of perpetuating the largesse."

    Are the lobbyists running amuck? Is TARP being extended?

    Jim, the problem I have is that you are using TARP (and everything but the kitchen sink) to bash Obama as part of some kind of pre-election political agenda. On TARP, he did extend money to help GM and Chrysler, who disintegratioon would have been devastating — same logic as Bush helping the banks. But I believe GM and Chrysler are back on their feet. You fail to mention this presumably because it may shed positive light on Obama.

    My point is that plenty of countries in crisis turn to Keynesian stimuli. It often works. Instead, of acknowledging this, you just continue to tell us how we are all going to hell like some fundamentalist preacher.

    To be frank, the message is not only getting tiring, it probably isn't true.

    Peter Galuszka

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