TARP and Government Accountability Office

[rowyn]

I am inclined to regard the TARP angle on this "lots of banks still in serious trouble" article as more of a way to give a new perspective on what is a depressingly real problem than as a specific criticism of the TARP program. But these lines cracked me up:

Dozens of TARP banks were "marginal institutions" that were financially weaker than other recipients and should have gotten more scrutiny before receiving taxpayer-funded infusions, the GAO said.

In a response to the GAO report, the Treasury Department said it would consider the GAO's recommendations to improve its funding process if it ever has a program similar to TARP again.

Treasury: "Yeah, if we're ever trying to throw something together in a week to prevent the complete collapse of the American economy again, we'll be SURE to look at your advice. HINDSIGHT SURE IS AWESOME INNIT." XD

TARP is one of many, many things that I will never know for sure if it was right or not. As this article noted, most of the funds loaned to banks under TARP have been repaid. From a lending standpoint, one expects a certain percentage of loans to go bad -- if a billion of the two hundred billion that was lent to banks isn't ever repaid, that's doing pretty well (and would be covered by the interest earned on repaid loans.)

But the two important questions that can't ever be answered are: Was it necessary? and How much will the knowledge that banks got bailed out once contribute to the likelihood that they will need to be bailed out again in the future?

I'm sure there are and will be very sophisticated models that purport to answer those questions, made by very smart sincere people who nonetheless come to wildly different conclusions.

I am inclined to think that TARP, for all its faults, was better than many of the alternatives, including "do nothing." But I don't know that, and I doubt I ever will.

Comments

[shockwave77598.livejournal.com]

My issue with the TARP was that the banks now have NO reason NOT to continue business as usual. Make bad loans? Unca Sam will bail you out. Run a business with idiots in charge that make 1/4 billion for keeping a chair warm and doing what the board tells them to do? Unca Sam will guarantee that salary. And all this giving away of taxmoney by a neocon who says regulations are bad, mkay...

It was necessary, yes. But 1/5 of the banks should have been allowed to fail first and utterly burn to the ground. Let there be an accounting for greed, incompetence and out and out thievery. If we cannot have any regulations to keep these ninnys from endangering western civilization, then they shouldn't expect ANY help from the Govt. when they fail. They want the safety net? Then they follow the rules. Otherwise, they fall and die all on their own.