TARP Success?

Today, the Treasury Department declared that the government will only lose $29 billion from the TARP program.  This is being hailed as a huge success and that we saved the financial system and the economy, preventing a second Great Depression and barely losing any money.

I have some big problems with these statements.  First of all, most of the big banks that were infused with cash paid back that money within a year of the program starting.  How can a bank go from about to collapse to financially stable so quickly?

Think about Goldman, it received $10 billion from the government.  If they just took that money and invested it for a year in 3% government bonds, that’s $300 million!  Citi and Bank of America got $20 billion each.  That could turn to $600 million of pure profit.

Did the big financial institutions create a sense of panic, in order to get the government to step in and “save” them by taking over all their bad debts?  Did they know that this panic would lead the government create a web of regulations that stifles future competition?  Anytime banks and government come together, I have a feeling the banks are going to win.

Also, where did this money come from anyway?  We created $700 billion out of thin air, gave it to banks to earn interest on, took on their bad loans, and then they gave it back to the Treasury.   Will the government now put that money to rest?  Or will it eventually make it back into the economy.

And finally, $33 billion is still a lot of money.  We have just become desensitized to the number because we saw the $750 billion stimulus package and the $700 billion bailout.  $33 billion just seems like a drop in the bucket.

While the government claims the success of TARP, I find it hard to believe that it saved our economy and that the true cost was really that low.  We’re still mired in a stalled economy and the bad debt is still out there and has not been liquidated.  And with all the success of this bailout, business now knows that future bailouts will be sure to follow, allowing them to take more foolish risks and setting us up for even bigger failure.

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