The Campaign Spot

TARP: Our National Bioweapon of Cynicism

As I mentioned in the Morning Jolt, a big factor in the latest bit of fury over the economy is TARP, and the perception that while millions of Americans endure hard times, the federal government was willing to hand over billions upon billions in taxpayer money to save wealthy bankers from the consequences of their own bad decisions.

In a way, TARP may be one of the most consequential political decisions of modern times, spreading cynicism and distrust like a bioweapon, an obliteration of the benefit of the doubt to anyone who could be considered “elite.” You saw further fallout in the debate earlier this week. Mitt Romney tried to walk the tightrope, suggesting that he hates bailouts, but the TARP may have been necessary, and that he’s almost certain to never do something like that again, unless it was needed to “to make sure that we don’t lose the country and we don’t lose our financial system and we don’t lose American jobs, and that all the banks don’t go under.” Cain echoed that opposition of TARP as enacted but not in theory, and Ron Paul, Rick Santorum, and Newt Gingrich pummeled them for it.

So, a quick quiz: How much did the TARP give to banks? And how much did the taxpayers lose on all that?

The numbers are better than the popular perception might suggest:

Most banks have repaid their TARP money. As of Aug. 31, the Treasury had received $183 billion of the $205 billion distributed to financial institutions. The Treasury also got $26 billion from dividends, interest and stock, resulting in a slight profit for the program.

Now, mind you, this is the portion dealing with banks. As Kevin Williamson noted last year,

Citigroup paid back less than half of its bailout and the government took equity for the rest. We own a fifth of the company (and I wonder if that fact has anything to do with this.) . . . We still have billions of dollars’ worth of warrants on equity in 280 companies, almost all of them banks and insurance firms.

The parts of TARP dealing with insurance agent AIG and carmaker GM are worse ($14.9 billion for GM, based on the latest stock price).

Yet you don’t see much talk of Occupy GM or Occupy AIG. Instead, the protesters target David Koch and Rupert Murdoch — CEOs of companies that didn’t take taxpayer bailouts. What’s more, Barack Obama voted for TARP, offered no objections when it was proposed, and administered it — and yet he’s largely been immune from the fury over bailouts, at least from the Left.

Defenders of TARP have always argued, and will continue to argue, it was necessary to prevent a national credit freeze and a catastrophic domino effect of businesses collapsing because they couldn’t get loans for operating capital. But that financial market-saving move came at enormous political and social cost, accelerating a corrosive distrust of almost everyone even remotely associated with banks, big business, wealth, or the political system.


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