Blue Mass Group

Reality-based commentary on politics.

The Curse of TARP

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Christine O’Donnell defeats Mike Castle, I would argue, on his TARP vote.

Sen. Robert Bennett (R., Utah) voted for TARP. He lost the Republican primary for his seat in March.

Sen. Kay Bailey Hutchison voted for the TARP, and lost a Republican primary for Texas governor in March.

Sen. Arlen Specter was a Republican when he voted to support TARP. He later switched to the Democratic Party to avoid likely defeat in Pennsylvania’s GOP primary, but ended up losing the Democratic primary in March.

Sen. Lisa Murkowski voted for TARP, and she lost the Alaska Republican primary in August.

Some other TARP supporters have decided not to seek re-election, including Sen. Christopher Dodd (D., Conn.), Sen. Evan Bayh (D., Ind.), Sen. George Voinovich (R., Ohio), and Sen. Judd Gregg (R., N.H.).

So far, just two senators who voted for TARP have survived tough primary fights this election cycle. Sens. John McCain (R., Ariz.) and Blanche Lincoln (D., Ark.) both won their primaries this year.

http://blogs.wsj.com/washwire/…

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Comments

  1. As you may recall it didn’t pass the first time.  It passed on the second try largely because the pot was sweetened with pork, which of course made the second bill cost more than the first.  Instead of bailing them out we should have broken them up, IMO.

    • The original premise of TARP was to acquire hard to value mortgage securities.  This quickly morphed into the Treasury making loans to most large banks and taking equity positions in others (even some banks who did not want to take them).  What is worse is that the Federal Reserve ended up buying or taking as collateral some of the same types of securities that TARP was supposed to be used to acquire.  So we could still end up with another bailout, but this time of the Fed and its multi-trillion $ balance sheet.

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      p>Breaking them up would have been a better alternative looking at where we are now:

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      p>Citi – paid back loans but gov’t still has enormous equity stake
      Wachovia/Wells Fargo – paid back loans after Wachovia almost failed (and gov’t tried to arrange Citi/Wachovia merger, now that would have been ghastly)
      Goldman – morphed into a bank to borrow from the Fed and was saved by a free backdoor bailout via AIG
      AIG – Screw up of screw ups, $100B+ owed and gov’t owns 79% of the equity
      Fannie / Freddie – $148B and growing with no clear end in sight
      GM/Chrysler – TARP goes to cars and crashes.

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      p>There is a longer list, but the picture is clear. TARP may have “saved” the financial system, but would the cost of failure been smaller if the gov’t had not intervened in Bear Stearns initially?  We will never know, but a case can be made that a Bear failure might have reined in the others in time to stop the crisis we had 6 months later.

  2. blog on politics a little like reading the Farmer’s Almanac for weather predictions?

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    p>A simpler hypothesis: the Republican Party has lost its directions and the crazies it courted are now running wild. This hypothesis, I submit, is better because it doesn’t assume voters make rational decisions.  

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