Tweet
Does anyone still wonder at why U.S. citizens -of all kinds- are more than pissed off,lacking any confidence in their political institutions,and feeling pushed to point of mindless antagonism?
"From a policy perspective, any assessment of whether such a complex enterprise is a success or failure, particularly in light of all of the other Government efforts to stabilize the economy during the worst economic downturn in decades, is a difficult task and depends greatly on one’s perspective. With respect to whether TARP has succeeded in restoring liquidity and stability to the financial system, for example, there are without question significant signs of improvement in the stability of the system. The causes for such improvement are no doubt many and complex, but there is little question that the dramatic steps taken by Treasury, the Federal Reserve and the FDIC through TARP and related programs, in the face of what can only be described as panic conditions, played a significant role in bringing the system back from the brink of collapse.
Whether the other policy goals of EESA are being met, on the other hand, is less clear. The progress on meeting the goal of “maximiz[ing] overall returns to the taxpayer” is unclear. While several TARP recipients have repaid funds for what has widely been reported as a 17% profit, it is extremely unlikely that the taxpayer will see a full return on its TARP investment. For example, certain TARP programs, such as the mortgage modification program which is scheduled to use $50 billion of TARP funds, will yield no direct return, and for others, including the extraordinary assistance programs to AIG and the auto companies, full recovery is far from certain.Similarly, Treasury’s original stated goal of increasing lending has not yet occurred, although, as SIGTARP’s recently issued audit on TARP recipients’ use of funds indicates, it is likely that lending from TARP recipients would have decreased far more in the absence of TARP funding. Similarly, the goals of “preserving homeownership,” “promot[ing] jobs and economic growth” have not yet been met, and the ultimate success of meeting these policy goals will depend on programs that are just now reaching the implementation stage, such as the TARP’s mortgage modification program and the public-private investment funds. In the meantime, the risk of foreclosure continues to affect too many Americans; unemployment continues its rise to levels that Treasury has characterized as “unacceptable”; the so-called “toxic” assets that helped cause this crisis for the most part remain right where they were last fall – on the banks’ balance sheets; and it is becoming more and more clear that the commercial real estate market might be the next proverbial shoe to drop, threatening to increase the pressure on banks and small business alike yet again."
8 Comments
TARP defenders always say that it showed that it was better than doing nothing. I have never found this very persuasive. Doing something stupid may be better than doing nothing at all but is far worse than doing what was sensible.
Most of the money went to the TBTF which allowed them to redeploy their resources to re-engage in speculation. For them, what was more important were the behind the scenes credit lines and changes in accounting rules which allowed them to use mark to fiction instead of mark to market in evaluating their assets and to mark down their debts. The biggest gift of all was the government’s failure to follow the law and enforce Prompt Corrective Action which would have placed almost all of the banking industry into receivership.
As for AIG, that money is gone. A sizeable chunk of it ($13 billion) went to Goldman to ensure the investment bank’s survival. It was pure coincidence that Paulson had been CEO and chairman of the board at Goldman before becoming Treasury Secretary or that the guy he chose to head AIG was a member of Goldman’s board.
The terms that the TARP got for its aid, that 17% hoohaw, were far, far less than private investors like Warren Buffet got. And a lot of money that went out as with AIG was lost or wasted. BTW the AIG buyout took place a few weeks before the TARP but I think additional monies came out of the TARP later for it.
You could say much the same about the GM and Chrysler bailouts, which I happened to support. There was no plan on where to take the automakers and how to get them there.
The TARP was not used at all for its original purpose, i.e. to buy up toxic assets which was even stupider than the ones it was used for.
I think the story we are getting that the TARP somehow saved the system is completely revisionist and mostly BS. It was slow to get up to speed and remarkably ineffectual.
And now this only adds to the mess:
“The FDIC said its insurance fund’s assets exceeded liabilities by $10.4 billion, a mere 0.22 percent of insured deposits, as of June 30. The liabilities included $32 billion of reserves the FDIC had set aside to cover bank failures that it believed were likely to occur during the next 12 months.”
While the writer skewers Bair, something tells me that there’s much more to the story.
Thanks for the link, ubetchaiam. So, do we keep trusting in an insurer that is bankrupt? My small brain tells me to go tomorrow and withdraw the small nest egg that it has taken my entire life to accumulate.
I’ve been telling people for months to get their assets out of banks,etc. and put those assets into credit unions,bonds,and local community banks that have been researched.
There still is time.
Yes, ubetchaiam, back when the discussion was going on here I moved the bulk of my savings into a smaller, local state bank in business since 1904. I still wonder if any bank can cover its deposits if FDIC is unable to; my own better judgment tells me, “no”.
And to add to the big US banks’ woes, Iran announced in the last few days they are going pretty much completely to trading in the Euro; thereby decoupling from the US banking system.
Here is an earlier article (2004/05/06 ??) which goes into detail as to the effect of Iran going to the petro/Euro.
So, looks to me like there are more dark days ahead for the US banking system. [sorry for the ultra-realistic outlook.]
What are you going to do with it?
Oh lordy, ekunin, I don’t know – seems to be the mattress, bury it in the back yard, or maybe a safe deposit box?
Recommended. Thanks ubetchaiam and Hugh.
I’m barely literate when it comes to high finances, but for me this article by Matt Taibbi in Rolling Stone of Jul/2009 states it all plainly enough for me to see a lot of what is going on:
I’m not even going to attempt an excerpt for in this 7 page article there are too many most important items to choose from.