Politico: In a World Without Citigroup, Survivors Would Envy the Dead

As you pack up your beach chair and bid the Summer of Recovery goodbye, you may notice that the shoreline is still strewn with bodies. Manufacturing is down. Home prices are down. Even the “Diesel Fuel Index” is down. Formerly recession-proof industries from gambling to cable to death itself are struggling.

So what better time to celebrate the success of the government program that did so much to make it all possible? Politico’s Ben Smith declares the Bush Administration’s Troubled Asset Relief Program a “success none dare mention.”

Smith’s argument, to put it mildly, is political rather than economic. He posits that the program staved off the economic hyperpocalypse, but that this achievement has largely been lost on a public too stupid to know what’s good for them. Politicians are “generally scared” of a “rank and file” that has managed to channel “anger into an assault on members of Congress who voted for the measure.” This last part is not a particularly bold claim, and Smith finds some funny examples of TARP supporters trying to recast themselves as TARP opponents. The TARP is extremely unpopular.

And it deserves to be. Smith’s defense of the TARP consists of the shrill, panicky rhetoric we have heard many times before: “meltdown,” “looked into the abyss,” “narrowly avoided another Depression,” “bread lines and cat food,” “apocalypse avoided,” “dark scenario,” “1930s-like depression,” “consensus,” “consensus,” and “consensus.”

Some of the facts are wrong: “The banks at the center of TARP” have not “paid the money back” unless Citi has stopped being a bank.

Others are misleading: Smith asserts without evidence that the TARP is “widely viewed as the original sin of the Obama administration,” but elsewhere notes that Democrats have spent more money on anti-bailout campaign ads this cycle than Republicans.

And others are both misleading and wrong: Even if the top 10 TARP recipients had paid back their bailouts (they haven’t), there is still a large and growing list of TARP deadbeats once you get outside the major leagues.

If the “angry electorate” Smith condemns is having trouble recognizing the TARP’s life-giving properties, that could be the stark contrast between the recovery described by political hacks and the recession as measured by the growing number of For Lease signs in towns all over this country. But Smith is here to disambiguate us all:

Polls suggest the public has only the haziest view of what TARP was. It’s often conflated — not least by politicians who voted for it and now seek to muddy the waters — with the stimulus, a piece of policy whose supporters and foes have fallen into a much more familiar debate about the role of government and public spending.

How could anybody have gotten the idea that TARP and the ARRA Stimulus are related? Could it be that four of the 10 largest TARP payouts went to auto makers, an insurance company and the GSEs instead of going to the troubled banks the program was designed for – and that these payouts are among the nearly $400 billion in committed TARP funds that have not been paid back?

For support, Smith turns to some politicians, a Brookings Institution scholar and the July study “How the Great Recession Was Brought to an End” [pdf] by Princeton’s Alan S. Blinder and Moody’s Mark Zandi (two vociferous bailout supporters back in the day).

While some of that study’s claims have been pre-empted by subsequent bad news, the ones that remain are pretty amusing. Zandi and Blinder point to the upcoming General Motors IPO – a nakedly political gesture completely disconnected from the company’s performance – as evidence that Treasury’s excellent adventure in auto and auto parts manufacturing has worked out. They consistently lowball economic performance in their no-bailout scenarios and goose it in their with-bailout projections (adding, for example, a percentage point to 2009 GDP decline more than was indicated by actual GDP performance at the time; click here for Veronique de Rugy’s quick lesson how to game GDP numbers).

But in the end, even Zandi and Blinder have to allow that “It is not feasible to identify and count each job created or saved by these policies” and concede that “with the economy still weak, more government support may be needed, as seen recently in both the extension of unemployment benefits and the Fed’s consideration of further easing.”  Translation: Performance of the economy has been even worse than interventionists claimed it would have been without any intervention, so that proves the intervention worked. Because being a hawk means never having to say you’re sorry.

If the polls are any indication, the American people have figured all this out already. Someday the media may catch up with them. Maybe we’ll even have consensus.

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  • ||

    Excellent use of Papa Shango.

  • ||

    I would have preferred The Godfather with some ho's.

  • MNG||

    Naw, Papa Shango was much more obscure, well done Tim.

  • ||

    Mr. Wright has been several characters, all interesting. I find your preference of one over the others offensive.

  • Rudan||

    I find your larger than appropriate knowledge of pro-wrestling hilarious.

  • ||

    Leaping Lanny Poffo is nothing to laugh at. The Genius, however, is. And don't you dare laugh at Koko B Ware.

  • cynical||

    I thought it was pretty racist.

  • Draco||

    Do you at least understand the difference between saving a couple of automakers and saving the financial and banking system itself? Because there is a world of difference between the two. If GM goes down, there is a bunch of pain, especially for employees and existing customers. If the banking system fails, if money market funds break the buck, do you know what happens? Mad Max, that's what.

    By all accounts Fannie and Freddie are the places you should be looking for lost money - not the TARP and big banks. TARP shored up their reserves, and it was transferred back in due course. What Freddie and Fannie are doing is a whole 'nother story.

    Most of the anti-TARP raving here and elsewhere is anti-intellectualism of the highest order. Just be glad you weren't the one who had to make the decision in those awful days of 2008.

  • The Memory Pit||

    Do you work in finance, Draco? Just curious.

  • I am not the government's ATM||

    Draco, a money market fund did break the buck in 2008 and the result was the temporary Treasury Guarantee Fund. It was implemented by the govt. and purchased by the funds themselves and guaranteed stability to minimize any runs. This was extended a few times until things calmed down.

    This is all that was needed until the initial panic was over. TARP was a gimme to all the losers and we will suffer from this for many years.

  • Mango Punch||

    The treasury guarantee was like two weeks after Evergreen broke the buck - and I can't think of a single instance of it being tapped. I'm pretty sure the parent companies of managers of funds that broke the buck simply stepped in and made people whole.

  • prolefeed||

    Most of the anti-TARP raving here and elsewhere is anti-intellectualism of the highest order. Just be glad you weren't the one who had to make the decision in those awful days of 2008.

    Ooohhh, how I wish I was the one who "had" to make the decision back then, because I would have vetoed TARP, and then proceeded to veto a whole bunch of other unconstitutional stuff and maybe, just maybe, unemployment would be lower than the current nearly 10%.

  • DJF||

    “””””TARP shored up their reserves, and it was transferred back in due course.”””

    It was transferred back because the big banks were declared too big to fail. This gave them access to extra low interest borrowing which they then turned into a profit. But its hard to lose money when you are borrowing at less then 1% and your competitors don’t have that sort of protection from the government. Though with the idiots that run the big banks still in charge I have no doubt that they will manage to screw things up again since they have learned nothing since they have suffered no consequences. In fact they have been granted a massive subsidy.

  • Spoonman.||

    GM's capital improvements and plant would have been bought out by more competent companies, and I don't see why handling the bank collapses by FDIC is somehow worse than handling them with TARP.

  • robc||

    The banks that paid back TARP first were the ones who didnt want the money to begin with. They fought taking it and it was basically forced on them under threat.

    And dont forget the meeting at the White House in the early Obama days where one of the CEOs brought a check to pay it back (novelty check, I think, you dont write a check for that kind of money) and Obama blatantly refused it and threatened them again.

    Anyone afraid of the banking system failing is a fucking loser. All systems, societies, governments die. ALL. Its the circle of life (cue music).

  • robc||

    2 years of depression >>> 10+ years of lack of growth.

  • Mango Punch||

    All the banks wanted TARP, and the IBanks even converted into bank holding companies to get it. It was cheap money and sent a signal to the market that you were going to be around for awhile.

  • robc||

    Bullshit. BB&T, for example, made it very clear they had no interest. IIRC, a majority of the large banks fought taking the money.

  • robc||

    Majority was wrong. Of the big 9, 3 opposed taking TARP funds and were forced into it.

  • DJF||

    So how were they forced to accept the money, did Paulson and Bernanke put a gun to their heads? Unless I see evidence of a gun or a knife then there was no force involved. What were they threatened with?

  • robc||

    Last October, then-Treasury Secretary Henry Paulson ordered nine banks that the Treasury Department described as “healthy” financial institutions to surrender ownership interests to the government or else face regulatory action that would force them to surrender ownership interests to the government, according to an internal Treasury Department document.

    Paulson’s extraordinary threat culminated in one of the most sweeping government intrusions into the free-enterprise system in the history of the United States.

    Judicial Watch, a nonpartisan watchdog organization, used the Freedom of Information Act to obtain a copy of the internal Treasury Department “talking points” that were prepared for Paulson to use at his Oct. 13, 2008 meeting with the chief executive officers (CEOs) of the nine banks. …

    Did the banks have a choice? Not according to Paulson’s talking points.

    “We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed,” Paulson told the bankers, according to his talking points. “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.”

  • DJF||

    So why didn’t they fight it in court? Paulson did not have a gun, he had a regulation, and regulations can be challenged in court.

  • robc||

    Becuase they would have lost?

    Force doesnt require a gun, but like hell Paulson didnt. Just like the IRS has a gun. Like the mafia, they dont have to flash the gun.

    Could they have fought it? Yeah. Should they have? Probably. But people pay the mafia protection money too, even though they shouldnt. Its understandable though. And the fact that they could have fought it doesnt make it any less force.

    All acts of government are backed by force. Even the ones I support.

  • DJF||

    All they had to do was delay it in court and if the banks themselves were solvent then they could prove they did not need the money.

    Of course that would probably get them kicked out of the bankers cartel and no longer get access to Fed and Treasury money at below market rates. That is what the bankers were afraid of, that is why they took the money. If they were no longer in the bankers cartel then they would no longer have those guaranteed profits that allowed them to grow so large.

  • Draco||

    Guys, "let me be clear" there's plenty to hate about TARP.

    My main point was we shouldn't lower ourselves to the level of the Frankenstein mob with the torches and pitchforks who want to lynch everyone who voted for the original TARP. Why? Because there is a difference between bailing out the financial system - without which our modern economy simply couldn't function - and bailing out specific auto makers who couldn't compete.

    In hindsight, were there better ways to tackle the problem than TARP? Almost certainly. But there was enough uncertainty and looming catastrophe that I think it is only fair to give the benefit of the doubt to those who voted for it because they thought the financial system - and the country - would collapse without it.

    And it is very clear to me, as I've stated before, that 99% of those in government don't even understand the way the financial system works. So blaming these idiots for intentionally helping certain bankers or other mustache-twirlers is probably giving them too much credit.

  • Fist of Etiquette||

    I don't think my rhetoric would count as shrill or panicky if I pointed out that TARPless world would consist mainly of thunderdomes.

  • Draco||

    Heh. Well, it's not the Thunderdomes you'd be worried about. It would be the roving gangs of looters and rapists, and wondering how you were going to buy yourself a ticket to a safe place like Somalia when all of your life's savings were no longer accessible. Look, we don't know what would happen if the financial system completely broke down. But a look around me at current American culture tells me that it wouldn't be pleasant. Maybe in Amish country, you'd be okay.

  • Fist of Etiquette||

    It would be the roving gangs of looters and rapists...

    Then I'm in luck, since that's who I'm normally worried about anyway.

  • ||

    Look, we don't know what would happen if the financial system completely broke down. But a look around me at current American culture tells me that it wouldn't be pleasant.

    You put way to much importance in Wall Street and the FED.

    The biggest change to your average American if this happened would be the surprise of how pretty the money your local bank prints in comparison to the crap the US mint has been printing.

  • rice bingham||

    I think you mean how pretty US currency would look in comparison to all the other paper products out there.

  • Mango Punch||

    Wall Street is pretty important.

  • prolefeed||

    OK, Draco at 10:24 comes across as parody trolling.

    I give it a 6 -- imaginative, but not even remotely believeable.

  • prolefeed||

    OK, Draco at 10:24 comes across as parody trolling.

    I give it a 6 -- imaginative, but not even remotely believeable.

  • ||

    roving gangs of looters and rapists

    But I do worry about what Congress will do to me if they catch me.

  • ||

    "Others are misleading: Smith asserts without evidence that the TARP is “widely viewed as the original sin of the Obama administration,” but elsewhere notes that Democrats have spent more money on anti-bailout campaign ads this cycle than Republicans."

    He also might want to brush up on who's getting clobbered by the Tea Party in the primaries. It isn't the Democrats who should be so worried--those are mostly Republican scalps I see on the wall.

    Oh, and while he's tallying up all the saving that TARP's done for us? He might address that as of today, I'm counting 119 banks that have failed in calendar year 2010.

    http://www.fdic.gov/bank/individual/failed/banklist.html

    What exactly did TARP stop from happening again?

  • Draco||

    You too Ken. I love your posts, I think you are a very smart guy. But your undifferentiated anti-TARP tirades seem uncalled for.

    Here's how one economist summarizes the losses (or gains!) to the Treasury in various categories:


    So here are the eventual taxpayer losses we are looking at:

    Fannie and Freddie — $165 billion and rising

    FDIC — Over $100 billion

    FHA — Who knows, even today they’re still encouraging new sub-prime loans.

    AIG — $0

    The big banks — negative $7 billion

    Would it be fair to say that the initial reporting of the crash of 2008 was a bit misleading? The reporting that led most people to form indelible opinions that they will probably never re-visit or re-evaluate?

  • ||

    So, what are we talking about, broken clocks being right twice a day meets buy low, sell high?

    My take is that TARP was a crappy idea in the beginning--and it should never be repeated. And if some of the people I know went to Vegas with my money (without asking) and made a fortune?

    The first order of business is making sure they never, ever do anything like that stupid ever again. Even if I came out ahead, I want to see some consequences and repercussions.

    Oh, and has your economist friend taken the cost of all the rotten new regulation that TARP supposedly justified into account?

  • ||

    There were a few things that made TARP much worse, in no particular order...

    1) Forcing money on institutions that didn't want it.

    2) Refusing to let institutions pay the money back.

    3) Subsequently using participation as an excuse to remake Wall Street in Obama's image.

    4) Obama using TARP to bail out the UAW--to the extent that the UAW started negotiating directly with regulators when it couldn't get what it wanted from Management BEFORE they bailed out GM

    5) Many of my libertarian friends prattling on about the excesses of the Bush Administration while all this was going on...

    Am I nuts about TARP? Yeah, probably so. But I'd argue justifiably so.

    I was jumping up and down yelling at people I work with on the phone--live--when Santelli made his famous rant. I was desperate for a construction loan myself at the time...

    All of it happened so fast and right in front of everybody--and hardly anyone paid any attention until the recession word started getting bandied about. I was watching everything from the eye of the storm since July of '07, and I couldn't even garner the interest of my usual libertarian friends--they thought I was makin' a big deal out of nothing at the time...

    Yeah, a little crazy about TARP? I plead guilty. But then the Loyal Nine got pretty upset about bailing out the East India Company too! Most of them were firebrands, some of them were irrationally so, but when you go so long watching people you care about being so terribly abused--and they don't even seem to realize it?

    Maybe it tends to radicalize you.

    Maybe that's what it did to me--maybe justifiably so.

  • Rock Action ||

    That whole thing.

    I was a student (an older one) in 2008 when the crash was just about to happen and Citi, through Fannie or Freddie I believe, wouldn't/couldn't even release my pittance of a student loan. They kept blaming it on administrative failures, which was bull----. When the automated menu said "If you are a member of Congress or from a Congressional office hit '6'" I knew something was damn well up, too.

    They almost folded. Not sure what my point is here, other than that I feel your construction loan pain. And I'm still furious the public paid for the mistakes of an all-too privileged few. It reeked of the worst kind of corporate welfare. Especially the non-negotiation about the prices of certain banks' shares during bankruptcy. That was unforgivable.

  • Rock Action ||

    Bad grammar there. But I still remember feeling unbridled rage when Citi kept its naming rights to the new, publicly-financed ballpark that the Mets had just built. After the bailout. For millions of dollars.
    Don't care about the percentage of it compared to the overall amount, don't care about a thing like looking stable for the average citizen. That was a microcosm of the disdain they had for the public, and their belief that there was nothing wrong with their greed and subsequent bailout.

    I'm radical, too. I think I'm sweating just typing that.

  • Mango Punch||

    1) Considering your post, I hope you're still a student.
    2) Freddie/Fannie never touched your student loan.

  • Rock Action||

    1)Sallie Mae. Pardon. Folksy, huh? Well, they - Fannie, Freddie, Sallie, Ginnie - all started as goverment-sponsored loan enterprises.
    2)Thanks for this nugget, sarcasm or not: "Wall Street is pretty important"
    3)Forced TARP money seems to be a standard story. You can debate "forced" all you want, but some banks seem to have not wanted the money, be they "IBanks" or not.
    4) Got a card with a watermark?
    5) Asshat

  • nekoxgirl||

    AIG only paid back part of the TARP money. The rest got ridden off as a tax deduction or something:

    http://www.dailyfinance.com/st...../19322589/

  • ||

    Ever notice how TARP proponents have to lie about everything?

  • Mango Punch||

    *Choose to

  • Shannon Love||

    The problem with understanding the financial system is that people think it has to do with moving this "money" thing around. They think that if the system "crashes" it just means we've misplaced various piles of money and we just need to track down all the piles and divide them up properly. They are wrong. The financial system doesn't deal with money. Money is just a vector to move the real thing the system deals with: information.

    The financial system is an internet. It moves information and perform calculations. People think the financial system "crashes" like a vehicle or a building. It doesn't. It crashes like a computer network and the consequences are the same: no one can communicate with one another.

    The government triggered this crash by intentional jamming the interest rate price single in the residential housing market. The interest rate contained vast amounts of information that the financial system needed in order to efficiently allocate the material resource and human labor for building houses.

    All the government programs to "lower" interest rates for home buyers blinded the market and caused a massive misallocation of material resources. We built houses in the wrong places. We built them to big and to fancy. Worst of all, we built them for people who were never going to generate enough surplus resources to replace the resources consumed building the houses.

    The mortgage backed securities spread the corrupt information throughout the entire system. It took nearly 30 years but eventually the lies injected into the system by government eventually accumulated to level the system could no longer ignore. The promised rate of replacement resources failed to materialize on a vast scale.

    The initial TARP was the government stepping in and pledging to replace the resources squandered on housing with resources extracted from all the citizens using the tax mechanism. This stopped the cascade. In effect, it rebooted the system.

    I think the first pulse of TARP was necessary because the market could not correct the massive damage done by the enormous scale of the government induced distortion. Only the government had the scope and power of operation to create the problem and only the government could move to mitigate the damage.

    In the end, prosperity is about material production and you can't make real things out nothing. When the government claimed it could make the material resources for houses appear with a wink and nod we should have known it would end badly.

    The government can get us to believe things that no grifter would dream of attempting. We should have known but we feel for it anyway.We have no one to blame but ourselves. Houses cost what they cost and we should have been content with that.

  • ||

    "I think the first pulse of TARP was necessary because the market could not correct the massive damage done by the enormous scale of the government induced distortion."

    Markets are not perfect. They're just better than anything else.

    They have tops and bottoms. They grow in onc direction until a larger countervailing force upends the conventional wisdom...

    Government is not to blame for market tops. They can make them higher. They can do the wrong thing at the top. But they don't make market tops happen. People can and do make bad mistakes for good reasons--it happens all the time.

    Markets deal better with burst bubbles than anything else. Would have handled the burst bubble much better than TARP did... If ONLY the rest of them had gone the way of Lehman! Don't you see in retrospect how easy it was to let Bear and Lehman disappear quietly in comparison? If ONLY the rest of them had gone like that!

    The suggestion that any part of our economy was better equipped to handle the shock of a burst investment bubble--better than the people who willingly put their money at risk? Is ridiculous.

    The suggestion that our economy is better off now because the government squandered our future discretionary income on the bad investments of the past?

    Is ludicrous.

    It doesn't even pass the stink test.

    There are only two kinds of politicians--and it ain't the Republicans and the Democrats. ...there are those who voted for TARP and those who didn't. And I will support any fruit loop, conspiracy nut, conversion therapy freak, who wants to illegalize same sex climate change denying--so long he, she or it is running against anyone who voted for TARP.

    ...until each and every one of those traitorous bastards is no longer in Congress--so help me God. We have to make them pay at the polls for what they did, or as sure as the sun will rise tomorrow--they'll do it again.

    And this will all happen again. Obama may be so stupid that he thinks the economic cycle will go away because he passed legislation against it--but then he's an incredibly stupid man. I've seen this happen before--it will happen again, and if we don't crucify the politicians for what they did, they'll make the same stupid mistake next time, guaranteed.

    They thought Social Security was the third rail of politics? Let's make 'em think again.

  • Shannon Love||

    Government is not to blame for market tops. They can make them higher. They can do the wrong thing at the top. But they don't make market tops happen.

    The real estate bubble was purely the result of the government blinding the market to the risk of making to many residential mortgage loans. It was in no way a market failure.

    The market is quite capable of dealing with bubbles caused by its own real world inefficiencies. However, it is utterly dependent on a functioning price mechanism to do so. When the government destroys the price mechanism, the market stops functioning e.g. when the central bank inflates the currency. No matter how elegant the market, it can't handle a massive bogus price single caused by monetary inflation.

    Markets deal better with burst bubbles than anything else.

    Again this wasn't a market based bubble. I get the impression you don't understand how enormous the government involvement in the residential mortgage market was. At their peak in 2004, Freddie Mac and Fannie Mae alone purchased 1 in every 2 residential mortgages at above market rates. When you combine all the other government programs to lower interest rates, 60%+ of all mortgages in the US for a period of over a decade were issued at a non-market interest rate. This translates into roughly 20% of all lending in the US being corrupted.

    Since the market did not generate the problem and the scale of the problem was larger than the market could have created, there are no resources in the market to heal the problem.

    The suggestion that any part of our economy was better equipped to handle the shock of a burst investment bubble--better than the people who willingly put their money at risk? Is ridiculous.

    Unfortunately, the vast majority of money "put at risk" was actually hoovered in by the government sponsored Freddie Mac and Fannie Mae who borrowed money precisely on the basis that there was no risk. The Lehman Brother's portfolio that brought the company down was 35% Freddie/Fanny securities. It was the implosion of those securities that triggered the company's collapse.

    The scale of the distortion was so huge that only companies that avoided the residential mortgage market and the associate securities all together avoided major problems. Any company that got heavily into the market was doomed because they were not receiving the correct price signals.

    I get the impression you think the problem was something akin to big players putting down a lot of money on roulette and then whining to the government when they lost. That is not what happened.

    A better gambling analogy would be a game of poker in which the government decides that the distribution of winning hands isn't fairly spread out over the players so it decides to "fix" the problem by secretly adding extra cards into the deck of 52 e.g. throwing in aces from another deck, thus skewing all the odds for any hand. After a time, no matter how skilled the player, all the bets would have no relationship to the hands being held. Winning and losing would be random.

    That is what the government did to the residential mortgage market. The only way not to get burned was not to play.

  • Mango Punch||

    Interesting analogy of money as a vector for information.

  • Shannon Love||

    It's not an analogy. It is literally what is happening. Money is just a vector for information just IP packets are in the internet.

  • nekoxgirl||

    I agree that the government's deserves the most blame, but why do you think more government intervention will fix the problem? They threw our tax dollars at the banks to keep the system from collapsing but if the system is built on 30 years of bad information, it's just delaying the inevitable. Our tax dollars won't magically make this bad system better.

    The consequences will be worse the longer we wait, which is why TARP was a horrible idea. It is prolonging the boom, thereby making the bust worse than it would have been if it had started in 2008.

  • Shannon Love||

    The government cannot did not fix the problem. It merely tried to covert it from critical crisis into a chronic condition. TARP was more like the government carelessly handled a firearm, shot someone and then had to staunch the bleeding so the victim wouldn't die on the spot. Even if the patient survives, they face years of rehabilitation, however, he has to survive the first few minutes to get to even that point.

    That's all it was initially, just an emergency patch to keep a cascade failure from sweeping through the planetary financial system.

  • ||

    The initial TARP was the government stepping in and pledging to replace the resources squandered on housing with resources extracted from all the citizens using the tax mechanism. This stopped the cascade. In effect, it rebooted the system.

    I think the first pulse of TARP was necessary because the market could not correct the massive damage done by the enormous scale of the government induced distortion. Only the government had the scope and power of operation to create the problem and only the government could move to mitigate the damage.

    Nothing short of Straussian. There is nothing in the set of facts known about the 2008 crises that would lead one to rationally conclude that in all probability 'the system' would collapse without a massive wealth transferal much less to assume that this counter history is factual in spite of it being reported as such in every damn AP report. The cascade effect on on demand paper did not occur until after TARP which suggest 1) TARP effected commercial lending in a very negative way, 2) the damage could have been mostly contained in the mortgage securitization arena.

    I can't tell you what happened on this counter history world that is anti-empirically assumed (for which I thus scoff at you and Draco), but I do know what was in the works that Summer by rivals of Bank of America.

  • Shannon Love||

    No offense but you're an idiot.

    You are an idiot not because you are necessarily wrong but because you confidently believe you actually have any definitive facts about the entire episode.

    Nobody anywhere or at any time can observe the state of the entire financial system. We're all like frogs in a well looking up at a tiny patch of sky and trying to deduce the weather over the entire state. We should restrict ourselves to making decisions based on what we actually see from our individual wells.

    Did the TARP guys panic and overreact thus triggering a much large problem than necessary? Maybe. Did they save us from a major economic disaster? Maybe. I don't know, you don't know, no one else knows and none of us will ever know because the system state is never observable.

    I think it probably better in general to overreact to minor problem than it is to under react to major one. I think that some intervention was needed owing to massive scale of the distortion. If correction of the distortion hit the system all at once, no private mechanism could have absorbed it. But I freely admit that is just a guess.

    People need to stop acting on information they don't actually posses. As Will Rodgers said, "It's not the things we don't know that's the problem. It's the things we know that ain't so that's the problem."

    If we'd done that in the first place we would be stuck guessing about the emergency measures.

  • Suprashoesweb||

    Supra Shoes is the first programme specifically designed for sports Supra Skytop

  • mike||

  • ||

    Wow! You super sugarfreed those motherfuckers, bot.

  • Shannon Love||

    This is just more leftist drivel. When will they learn that...

    Oh, wait, It's bot. Sorry, force of habit.

  • jtuf||

    Hmmm. Where's Tony?

  • ||

    This is what it comes to - no longer can the gubermint point to all the good things it does for you (with your money for higher cost than you could do it yourself), now it has to assert if TARP did not occur roving bands of zombies would be eating your brains. Without TARP unemployment would be 176% !
    The problem is NOT that I don't believe the gubermint's point, its just that it begs the following questions:
    1. Finance is highly, highly regulated - so why wasn't it regulated properly?
    2. If the gubermint didn't know what it was doing prior to the crash, why would anyone believe it now knows what to do? (actually, I believe gubermint is doing all it can do - its just that gubermint can't make us wealthy or even middle class - we do that ourselves, just like schools can't shovel knowledge into childrens' heads - they do that themselves, if motivated by their parents, and sometimes even that won't work), or perhaps the wonderful success in keeping people from taking drugs, or perhaps the wonderful ability to remake a society in Afghanstan in a short nine years (O, not quite finished).
    2. If the FED end all and be all of money knowledge, how is it that Bernanke said that "subprime is contained? The statement revealed a PROFOUND lack of knowledge of finance, and an apparent lack of any knowledge of CDS's, CDO's, etcetera. Does he think there are any negative externalities to low interest rates? (trick question - if Bernanke won't own up to the affect of low interest rates and the housing boom, than why did the FED unconsiously keep interest rates above 0 for decades???)
    3. Not just to pound the FED, let's pound Treasury. How is it that I am suppose to have faith in the competance of the Treasury secretary, when after given explicit instructions that he signed, about certain benefits from his employer (World bank) being taxable, he 'forgot' to list them on his taxes???
    4. And lest I be characterized as a running dog capitalist, how is it that we bailed out banks that failed (its profit and LOSS) - is it the gubermint program of affirmative action for the most stupid? The people who run banks that apparently don't understand that the most important part of a loan is not that it gets made, but that it gets paid back - these are the people the gubermint had to save at all costs???? There are thousands of banks that are not in trouble - the FED could have made 0% money available to them - but doesn't. What is magical about Goldman Sachs, or Citibank? O yeah, the world will collapse (see zombies) unlike the shangra-la we are now living in.
    Despite overwhelming evidence of fraud throughout the industry of house selling, from appraising to rating housing bonds, no one gets prosecuted... and gubermint regulated at every step of the way, no one in the gubermint gets fired. Huh?
    5. Lest I forget - Fannie
    6. Lest I forget - Freddie

  • Fluffy||

    The real problem with Smith's argument - and with Draco's argument - is that it's undermined by all the competing government interventions we already had before TARP, and by the non-TARP interventions that took place.

    "The financial system would have melted down" - well, that's not really possible. The non-TARP-bank element of the financial system is too large, and is backed up by the FDIC. Almost none of the banks seized by the FDIC stopped operating for longer than a morning. Everyone would have had access to their checking accounts. The FDIC would have spent more money, but when you're just printing it like there's no tomorrow anyway, what difference does that make?

    "Citi's industrial customers would have shut down because they wouldn't have been able to issue commercial paper" - the Fed just started randomly buying commercial paper anyway. If the Fed was going to do that intervention, what did we need to save Citi for?

    Would a collapse of the largest banks have caused economic disruption? Yup. Deflation? Probably. But the liquidation would be over now. The people who deserved to realize losses would have realized them, and civilization would have continued.

    With all the overlapping interventions that took place and with the Fed's willingness to print money, the reason to save any individual market participant regardless of size boils down to a desire to preserve the status quo distribution of assets and power. Seizing and liquidating Citi would have turned many rich people into poor people, and created new rich people when the underlying assets began performing again. That is the one outcome our system can never, ever contemplate. That's the "end of the world" scenario, from the perspective of our policymakers.

  • Corduroy||

    Something about a nail and a head

  • Jim||

    "the "end of the world" scenario"
    nice comment

    When the right people can stay rich I believe that is the time we will see this scenario play out.

  • Nick||

    I recently read an article by Becky Quick (from CNBCs Squawk Box) in Fortune with almost the same points made. TARP was a good thing because the economic establishment teetered on the brink. So it was in the interest of the public to help Goldman and JP jack the system - because Mr. Fortune reader you might not have made your bonus last year without the tax money. Again the public is too stupid to understand why this was important.

    I would say that a good portion of the public knows exatly why TARP was so important to these people.

    From a piece I wrote in August of last year: What cost stability.

    GM is Government Motors now. Chrysler is another division. AIG, the world’s largest insurer is now government run. Fannie Mae and Freddie Mac are now explicitly government entities, and back more than half of the mortgages in this country. The American tax payer is now on the hook for what looks like as much as 23.7 trillion in TARP liabilities according to Neil Barofsky, the Troubled Asset Relief Program’s own special inspector general. That is 23.7 TRILLION. 750 billion seems like a bargain in comparison.

    http://www.libertyandeconomics.....ility.html

  • Tim Cavanaugh||

    Maybe so, but I'll never speak a word against Becky Quick.

  • robc||

    Draco and his ilk need to answer 1 question: Why do you consider chaos a bad thing?

    Hail Eris!

  • Draco||

    Well, I can see that I missed a lot after I logged off last night!

    I wanted to reply to you first robc.

    Let me ask you some questions: how old are you? Are you married? Do you have children? Do you own a home? Do you have elderly parents to worry about and care for?

    I can assure you that people who do aren't as flippant as you are about bringing on the chaos. Chaos was kind of sexy and bad-ass when reading about it in a Michael Moorcock fantasy novel; in real life, it's not so nice, and people have made institutions like family and government to ward it off.

    And as far as my "ilk" - believe it or not, I am one of you guys. I am a libertarian. I've probably been in "the game" longer than most of you here. I've just gotten older, and accrued many cares and responsibilities. And learned not to be a complete purist zealot on any issue where it isn't warranted.

  • creech||

    Ben Smith's defense of TARP consists of "shrill, panicky rhetoric?" Isn't what he predicted could have happened without TARP almost exactly what Austrian school economists have been predicting would happen due to Fed monetary policy? Several decades ago, didn't Rothbard predict a bad end, blood in the streets scenario? Why are we libertarians now so ready to dismiss this as bogus scare talk used to pass TARP?

  • nekoxgirl||

    If there would have been blood in the streets, TARP didn't stop it. In a sense, Ben Smith and the Austrians are both right. There is a good chance there would have been chaos if Wall Street fell in 2008. But all TARP did was kick the can down the road. The longer the boom lasts, the worse the bust. If you think the aftermath of the collapse in 2008 would have been bad, just wait a few more months, a year at the most.

  • ||

    They saved Vikram Pandit's job. What else do you need to know?

  • Virginia||

    The media, like politicians, are lagging indicators.

  • youcbt210||

    So it was in the interest of the public to help Goldman and JP jack the system - becauseweeds dvd Mr. Fortune reader you might not have made your bonus last year without the tax money. ghost whisperer dvdAgain the public is too stupid to understand why this was important.

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