Everyone's favorite program TARP ends, with 650 billion of the 700 billion recovered, and jobs saved. But, I bet people are only going to remember that the government spent 700 billion.
BostonGlobe
BostonGlobe
WASHINGTON House minority leader John Boehner waved his arms, jabbed his finger, and urged members of both parties to take a courageous vote for what has become known as the Wall Street bailout.
These are the votes that separate the men from the boys and the girls from the women, Boehner said two years ago just before voting to authorize the federal government to purchase up to $700 billion in toxic assets from foundering financial firms.
Since then, anger over the legislation has cost some congressional backers their jobs and fueled the Tea Party movement. Even Boehner has become a leading critic.
Yet as the program winds down, some of its backers as well as independent analysts insist it has been a resounding success. Most of the money has been repaid, and Treasury officials expect it will cost a fraction of the initial projections. The mystery to supporters is why the Troubled As set Relief Program or TARP has become the dirty, four-letter word of the 2010 midterm elections.
We put out the financial fire at a much lower cost than anyone expected, but we lost the country doing it, Treasury Secretary Timothy Geithner said in an interview, referring to the public outcry against it. The early myth that the Obama administration came in and started these unjust bailouts and tried to take over the economy and that helped spark the Tea Party movement is the great political lie of the decade.
The program was proposed in September 2008, on the heels of the collapse of Lehman Brothers and AIG. Outlined by Treasury Secretary Hank Paulson, and backed by President George W. Bush, the plan granted broad powers to the Treasury Department to purchase bad assets that were plaguing investment banks, freezing credit markets, and battering consumer confidence.
Shortly after the measure President Bush signed the measure, critics attacked the plan as government overreach and a bailout of wealthy Wall Street investors.
About three months after Boehner gave his impassioned floor speech, he called for an exit strategy, writing in a USA Today op-ed that it has been managed with little transparency, no accountability and in a manner totally inconsistent with the way it was sold to Congress. His chief criticism was that, rather than being used to buy up toxic assets and get credit flowing again, the program was being used to help struggling companies. Boehner declined to be interviewed.
When the program ended earlier this month, the bulk of the $700 billion either had been repaid or had not been spent. All told, the White House projects the program will end up costing about $50 billion.
The allocation of most of the spending had been agreed upon by the Bush administration. But after Obama took office, his administration authorized $60 billion for the auto industry, which helped prop up General Motors and Chrysler. Critics contended that this was an unwarranted expansion of the program; the president said it was a job-saving necessity.
Yet even in Michigan, where the auto bailout is widely credited with resurrecting much of the auto industry, the program has proved unpopular. Representative Pete Hoekstra, a Michigan Republican, was assailed for his vote in favor of TARP during the GOP gubernatorial primary that he lost.
It became the symbol of big government and overreaching government, Hoekstra said in an interview. It didnt matter whether it worked or didnt. It, along with the stimulus package and health care, became one of the things that people just decided regardless of the merits, it was bad. And they ran with it.
Misinformation also surrounds responsibility for the program. Even though the program was pushed through by President Bush, nearly half of Americans believe it was President Obama who signed it into law, according to a Pew Research survey in July.
Forty-six percent of voters said they would be less likely to vote for a candidate who supported government loans to banks during the financial crisis, according to a poll Pew Research Center released recently.
That issue had more impact than any other in driving voters away from a candidate, including their support for health care (35 percent) or whether they are an incumbent running for reelection (26 percent)
The unpopularity of the program can also be seen in a state like New Hampshire.
The states senior senator, Republican Judd Gregg, was one of the chief architects of the approach and has remained a staunch defender of it.
It did exactly what it was supposed to do, which is stabilize the financial system when it was on the verge of collapse, Gregg said in an interview. But its become a pejorative because the substance of the program has been separated from the hyperbole around the program. Its come to be a shorthand term for excessive government spending, interference in the markets, and supporting Wall Street.
Yet now, both candidates vying to replace Gregg, who is retiring, have criticized the program.
Representative Paul Hodes, the Democratic nominee, voted against it in 2008, although he later supported using the funds to help the auto industry. Former attorney general Kelly Ayotte, the Republican nominee, says she never would have supported it. Let the market adjust and pick the winners and losers, she told the Portsmouth Herald editorial board.
Those who have tried to defend TARP have found little success. Representative Gresham Barrett, a South Carolina Republican, ran ads during his run for governor defending his vote after he was vigorously booed at a Tea Party movement rally.
I honestly believe with all my heart that we were at a point where men and women were going to reach in their back pocket and pull out a credit card or an ATM card, stick it in a machine, and nothing was going to come out, he said in a TV spot that showed him sitting in a living room, looking directly at the camera. Leaders make decisions based on the best information that they have, and they go with it. Thats what I did.
He lost the GOP primary by 30 percentage points to state Representative Nikki Haley.
Some of the most prominent primary defeats of this election cycle came to candidates who couldnt find a way to defend their vote on TARP.
Senator Robert Bennett was defeated in Utah during a Republican convention where the crowd chanted TARP, TARP at him. The votes were a contributing factor to the GOP primary losses of Representative Mike Castle in Delaware and Senator Lisa Murkowski in Alaska. I did try saying during the campaign that TARP was going to pay the money back and that that . . . was not going to cost the taxpayer anything, Bennett recently told the Salt Lake Tribune. Apparently nobody believed me.
The issue is unlikely to fade, and it could become a key litmus test for Republicans in the 2012 presidential race. Support for the program separates the mainstream GOP many of whom voted for it or voiced support from the new insurgent conservatives who rail against it.
This has been a scarring experience for people in policy and Congress and will make policy makers more risk-averse in the future, Geithner said. People will say Lets wait and hope it gets better instead of acting.
Matt Viser can be reached at [email protected].
