Debunking Bailout Myths
Apologists for government bailouts push two main myths:
- That all of the bailout funds have been repaid
- That the bailouts helped the average American
But the official government overseer of the Tarp bailout program – the special inspector general for TARP, Christy L. Romero – has debunked both myths.
Today, Romero wrote the following to Congress:
After 3½ years, the Troubled Asset Relief Program (“TARP”) continues to be an active and significant part of the Government’s response to the financial crisis. It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost).
And earlier this month, Romero stated that the portion of the Tarp funds which were supposed to help homeowners haven’t been disbursed:
A fund to support homeowners in the communities hit hardest by the collapse of the housing bubble has disbursed just 3 percent of its budget and aided only 30,640 homeowners in the two years since its creation, according to a report released on Thursday by a federal watchdog office.
The Hardest Hit Fund, which was created in the spring of 2010, grants money to state housing finance agencies for efforts to help families that are facing foreclosure. It has “experienced significant delay” because of “a lack of comprehensive planning” by the Treasury Department and limited participation by Fannie Mae, Freddie Mac and the large mortgage servicers, said the report by the special inspector general for the Troubled Asset Relief Program.
“Look at the TARP money that goes out to the banks,” said Special Inspector General Christy Romero in an interview with The Huffington Post. “That goes out in a matter of days. This has been two years and only 3 percent of these funds have trickled out to homeowners.”
Indeed, bailing out the big banks hurts – rather than helps – the American economy. See this, this and this. (And it doesn’t take a PhD economist to guess that using bailout funds to buy gold toilet seats and prostitutes is probably not the best way to stimulate the economy as a whole).
This is true even though the American people were opposed to the bank bailouts from day one, and continue to oppose them:
As I’ve noted since 2008, Americans are united in their overwhelming disapproval for bailouts to the big banks.
This has remained true right up to today.
As Rassmussen found only last month (as summarized by KXLF news):
Today’s Rasmussen Reports survey finds that most Americans don’t like bailouts for financial institutions.
60% Oppose Financial Bailouts; 74% Say Wall Street Benefited Most
Survey of 1,000 American Adults
• Just 20% think it was a good idea for the government to provide bailout funding to banks and other financial institutions, but 60% say otherwise.
• While many activists try to link the Republican Party and Wall Street, Republicans think the bailouts were a bad idea by an eight-to-one margin.
• Those not affiliated with either major party think they were a bad idea by a four-to-one margin. Democrats are much more evenly divided. Thirty-four percent (34%) of those in the president’s party say the bailouts were a good idea while 42% disagree.
• Overall, 68% believe that most of the bailout money went to the very people who created the nation’s ongoing economic crisis, but 12% disagree and 21% aren’t sure.
[And see this]
As the Washington Post’s Greg Sargent notes, the recent proposal from lobbyists to the American Bankers Association recommending ways to co-opt the Occupy movement accurately stated:
Well-known Wall Street companies stand at the nexus of where OWS protestors and the Tea Party overlap on angered populism. Both the radical left and the radical right are channeling broader frustration about the state of the economy and share a mutual anger over TARP and other perceived bailouts. This combination has the potential to be explosive later in the year when media reports cover the next round of bonuses and contrast it with stories of millions of Americans making do with less this holiday season.
(Except that it is the majority of Americans – not “extremists” on either side of the aisle – that share this anger).
The “Tea Party” movement was centered on the protesting government bailouts of the giant banks, before it was hijacked by the mainstream Republican party, Sarah Palin, Neocons and others. See this, this, this, this and this.
Ron Paul said last month at a GOP debate:
Bailouts came from both parties…. If you have to give money out, you should give it to people losing their mortgages, not to the banks.
And one of the most common sayings of Occupy Wall Street protesters is:
Banks got bailed out. We got sold out
Note: Even the bailout money which was repaid was largely just refinanced using money from other government bailout programs.