From Kevin Drum:
CBO estimates the government will make a profit of $7 billion
from the bank bailouts (though it may still lose money on GM and
Chrysler, which were also rescued with TARP funds) and it now looks like
AIG will pay back all its bailout money too.
Bottom line: the ongoing recession caused by Wall Street's reckless
behavior has cost us a bundle. But TARP itself? Its net direct cost is
zero, and when you include the fact that it almost certainly saved the
banking system and softened the recession, it may boast the biggest bang
for the buck of any bill ever passed by Congress.
Yeah.
UPDATE: Success can be measured in various ways.
TARP is a success in that it didn't cost us any money in the end. The banks repaid their debt.
Could it have been more successful? Sure, it could have had more strings in place, so this wouldn't happen again in the future. That is Warren's argument.
If you define success as vengeance, then it wasn't successful. Many of the people who caused this mess still have jobs and gave themselves fat bonuses last year.
If you define success as cleaning up all the ripples of badness caused by Wall Street, then it wasn't successful either. Lots of people are out of work.
TARP was successful in that it kept Wall Street from falling apart. It did. Most definitely. And if Wall Street fell apart, you would have seen much, MUCH worse devastation in this country.
Apt. 11d 
Your first link says the AIG bailout will cost the government $39 billion (per the CBO). AIG will ‘pay back’ only the part that wasn’t a gift.
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So is Drum saying that the Bush/Paulson TARP plan was good, and the Obama/Geithner ARRA plan (plus the use of TARP money for the auto companies) was bad? Probably not. It’s funny how when a Republican policy suceeds, it suddenly becomes fatherless, or even magically gets credited to Obama.
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Most of the TARP votes in Congress were Democrats, so there is a reason to not call it “Republican.”
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Will the money be refunded to taxpayers? Or will it be treated as “found money” by Congress?
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Won’t the TARP money go back to the folks who lent it to the government in the first place?
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Yep. Various Asian governments.
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If you go to the “make a profit of $7 billion” link, there’s a 5 minute interview with Elizabeth Warren which explains why the implementation of TARP is dangerously flawed. It’s worth listening to, but as a cheat sheet, Warren says that:
1. There were no strings attached in the initial TARP bailout.
2. TARP exacerbates too-big-to-fail because small and medium banks are shuttered, while the big banks are bailed out.
3. Even though the big banks have paid back their money, there’s now an implicit guarantee that the federal government will cover them in a future crisis, which is reflected in higher-than-deserved ratings for the big banks.
4. Because of the implicit guarantee, the big banks are a more attractive place to invest and the big banks themselves are freed to pursue riskier investments than their smaller competitors.
5. Warren argues that because of these issues, TARP makes us less safe.
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Speaking of banking news, Barney Frank is trying to keep Fannie Mae/Freddie Mac backing mortgages up to $729,000 (in high cost areas). The previous cap was $417,000.
http://www.reuters.com/article/idUSN1520082220100915
“”If we allow this to expire at the end of the year, it will be impossible to finance homes in most parts of Los Angeles and certain other major cities … and we will see a double dip recession,” Representative Brad Sherman, a California Democrat, said at the hearing.”
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I’m no conservative but I’m inclined to agree with Amy. If you think TARP ‘worked’, ask someone who used to— before the pop of the bubble.
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“If you think TARP ‘worked’, ask someone who used to”
If you think the Andrew Mellon, hands-off, “liquidate, liquidate, liquidate” approach worked, ask your grandparents.
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If you think the Andrew Mellon, hands-off, “liquidate, liquidate, liquidate” approach worked, ask your grandparents.
If you think the only alternative was to bailout mega-banks before requiring any reform or even public appraisal of exactly what the problem is, apply for work at the Treasury Department. You can have meetings with “private sector” bankers who used taxpayer backed guarantees to stay solvent, wiped out small investor, and kept not only their jobs, but most of their bonuses.
After the meeting, you can sit around and complain that crazy people can win elections and pretend it is because people aren’t very informed.
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I didn’t notice the update to the post before writing my previous comment. I still think it is wrong to say the banks repaid their debt. The banks, most of them, repaid TARP, but nobody has (or will) ask them to repay things like the interest on reserves (an out and out gift) or the extra tax dollars that will go to bailout the FDIC or any compensation for the implicit government guarantees they got.
Also, I don’t think vengeance captures all of the anti-banker backlash. This bailout created a huge moral hazard problem, most of which could have been avoided by punishing at the top.
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And, I don’t think you can consider TARP in isolation. A common complaint is that the stimulus is too small. It is hard to know if a counterfactual is correct,* but it is fairly apparent that a better designed TARP would have at least made it easier to bet support for a bigger stimulus.
*including the “without TARP we’d have had a depression” counterfactual.
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