Way back when Congress was first debating the TARP plan of September of last year, some idiot wrote:
Over the past days, I’ve become a reluctant supporter, or at least acknowledging that what the Paulson plan aims to do has to be done. You can’t say, “this will take care of itself” or, “let the markets work,” unless you’re comfortable with the stock market really crashing (several thousand points), and continuing to decline for a long stretch, with serious repercussions for the entire economy. An assessment from 2000 estimated that a drop in the DJIA from 11,000 to 8500 would mean a drop in household wealth of at least $4 trillion. The housing market would probably not recover for several years.
I’m noticing that the members of Congress who are on committees that deal with financial issues are (generally) on board with the plan, and the opposition seems to be coming from rank-and-file members, who, it seems safe to say, have less familiarity of the details of how the markets work. There seems to be a sense among some folk that if they don’t own stock themselves, a stock market crash wouldn’t affect them.
I can see a lot of reasons to not like this proposal. But I can see a lot more reasons why inaction is worse.
Oh, no! A stock market below 8500! (It’s currently 7289, and has been as low as 6547 recently.) A housing market not recovering for years! (Current housing supply is running several years ahead of demand.)
That idiot was… me.
One caveat in my defense — because of Henry Paulson, among others, changing the plan after its passage, the TARP funds haven’t done what they were supposed to do — get the toxic assets off the banks’ balance sheets.