October 3, 2010 was the two-year anniversary and expiration of the Troubled Assets Relief Program. Known as TARP, this program found itself in the crosshairs of a conservative leaning electorate in the 2010 midterms.
For many the first thing that comes to mind when mentioning TARP is bailout. However, it was not as broad as this, rather just a bailout focused on helping the banks.
The idea behind the program was for “the Department of the Treasury to purchase or insure up to $700 billion of troubled assets,” in an attempt to keep the economy stabilized, according to a Congressional Budget Office Report.
With the current unemployment rate at a high 9.6% according to the Bureau of Labor Statistics, many have seen TARP as more wasteful government spending. Opposition to this measure is believed to have sparked the anti-government spending group the Tea Party that found itself in the national spotlight during the recent midterms.
Despite the high employment rate, Ezra Klein, a journalist and blogger for The Washington Post, told The Guilfordian in an interview, “we needed it … we had to pay off the bad guys [the banks that got us into the mess]…if we hadn’t, everything would be much worse.”
“It’s hard to understand why we had to do something that seems so unfair,” said Klein.
Dr. Robert Duncan, a visiting assistant professor of political science said, “Some smart cookies said we’d be in some pretty deep yogurt (without TARP) … and unemployment is last one of the last indicators to rise.”
TARP also has faced public outrage because of its association with the American Recovery and Reinvestment Act (ARRA) of 2009. The two are lumped together as one giant bailout, when actually each had explicit purposes.
The latter bill, the ARRA of 2009, was focused much more on jump-starting the economy by supporting infrastructure, education, and job creation measures that the Obama administration believed needed funding.
According to Recovery.gov, a total of $1,685,701 dollars has been given to North Carolina education alone because of the ARRA of 2009.
Guilford County Superintendent Mo Green in an interview with The Guilfordian said, “It (ARRA) has allowed us to keep many initiatives going forward … allowing us to educate at a higher level.”
This confusion between the two bills is a prevalent one and a reason that 47% of Americans believe TARP was implemented under Obama, according to a Pew Research Poll.
The facts are that Bush implemented TARP and Obama implemented the ARRA of 2009. Both presidents supported TARP, but current public opinion displayed by the Pew Research Poll links the bailouts directly to the Obama administration.
Another major push against TARP has been the idea it was an initiative of the left, while TARP was largely a bi-partisan vote.
President Barack Obama, Governors Mitt Romney and Sarah Palin, and new House majority leader John Boehner all supported the measure. While Boehner and Palin will likely benefit greatly from the far right Tea Party movement, which traces its origins to the public outcry against TARP, they both supported the bill.
Palin and Boehner may seem to be immune, but other long-time conservatives have felt the pain of their TARP support during 2010 midterm elections.
Representatives Lisa Murkowski, Mike Castle, and Senator Robert Bennett all lost their primaries with nothing more prevalent in their “downfall(s) than TARP,” according to an NPR report.
The Campaign Media Analysis Group states that both Democrats and Republicans have spent $80 million in attack ads involving TARP. The main difference between Boehner and the group of former Congress people who lost their primaries is that Boehner has since distanced himself from his vote while Senator Bob Bennett, for example, did not.
Senator Bennett said to the New York Times, “I do hope that we can get the word out that TARP, number one, did save the world from a financial meltdown and, number two, did so in a manner that, I believe, won’t cost the taxpayer anything.”
While we have addressed the first point Bennett makes, that it perhaps saved us from a global financial meltdown, the second question still needs to be answered.
This is perhaps the most unrealized part of TARP. It may cost the taxpayer much less than often thought, providing a profit in some places.
TARP is often tagged as the $700 billion bailout, implying the money will never come back. However, recently Timothy Geithner, the U.S. Treasury Secretary, has projected costs be around $50 billion.
In an interview with The Guilfordian, Jay Newton-Small, a congressional correspondent for Time Magazine, explained, “It was, for the most part, a loan. It wasn’t $700 billion down the drain. Much of it has already been paid back and the rest of it — minus the car loans — is expected to come back to the Treasury plus interest and in some cases, a profit.”
An example of this was the North Carolina based Bank of America. By December 9, 2009, the bank had already paid back its $45 billion loan and had actually afforded approximately a $4.5 billion dollar profit to the U.S. Treasury.
As Newton-Small went on to say later in her interview, the real problem with TARP is that it has a “bailout stigma.”
Many have voiced concerns that this policy has been judged from perceptions and not true merit, and we are setting a dangerous precedent; one where, according to Ezra Klein, “good policies look bad.”