In designating the wealthiest Wall Street banks as “too big to fail” Washington told the rest of America that it was “too small to succeed.”
Also, there is also considerable debate as to the accuracy of the “doom and gloom” pronouncements that preceded TARP – which would obviously negate much of its supposed efficacy in avoiding a global economic meltdown.
For example, a week before TARP passed, Federal Reserve Chairman Ben Bernanke appeared before the Joint Economic Committee of the U.S. Congress and made an impassioned plea for taxpayer-funded intervention, saying that emergency action was required immediately in order to “address the grave threats to financial stability that we currently face.”At this hearing, Bernanke testified that the commercial paper market was on the verge of shutting down. This sent major shock waves through Congress, as many companies use the sale of this short-term debt to pay their bills and make payroll. A week after Congress passed TARP, however, Bernanke announced the creation of a special commercial paper funding facility – thus arbitrarily alleviating one of the key pressures he had used as leverage to help get the bailout passed.
Perhaps the most effective argument against those who claimed that the sky would fall in October 2008 absent government intervention is the fact that government intervened – and the sky fell anyway. Economists in their taxpayer-funded ivory towers will no doubt continue to do battle over hypothetical contingencies, but that doesn’t change the fact that 8 million jobs vanished in just over a year’s time – and those jobs aren’t coming back anytime soon. Meanwhile, none of the TARP money that’s been repaid to the U.S. government thus far is actually being returned to taxpayers. Nor is it being used to pay down America’s ballooning debt. Instead, it’s being spent on new bailouts, more borrowing and additional deficit spending.
Also, in confronting the “toxic” realities of TARP it’s important to remember that its initial $700 billion outlay represents only a small sliver of the money government has spent, lent, pledged and printed since the recession began in December 2007.
That’s a tab taxpayers will still be picking up decades from now.