Wednesday, March 30, 2011

Our intuition about TARP was correct

Today's NY Times has an op-ed piece entitled Where the Bailout Went Wrong by Neil Barofsky, special inspector general for TARP. He verifies the near universal distrust for the procedures and results of the "Troubled Asset Relief Program": it helped Wall Street and ignored Main Street. He points out that the legislation enabling TARP (the Emergency Economic Stabilization Act) specifically included not only the provisions that lent money to the big speculative banks but also, and equally, specified that TARP money was to be used to buy back billions of dollars worth of mortgages and renegotiate them to help millions of Americans keep their homes. Furthermore, banks were to file precise statements about their current lending practices and future plans -- in order to prevent a similar debacle in the future.

The actual result was a de-emphasis, verging on neglect, of all aspects of TARP except shoveling money into the coffers of banks deemed "too big to fail." As a result of this bailout, these banks are bigger, stronger, richer, and more arrogant and disdainful of regulation than ever before. They flipped the public and its government the bird by promptly lavishing large bonuses and compensation on their CEOs, traders, and other creators of the mess we are still trying to clean up. This was made easy by the acquiescence of Obama's finance ministry, who come from Wall Street and admire CEO's like Goldman-Sachs' Lloyd Blankfein , Fed-Ex's Frederick Smith and now GE's Jeffrey Immelt. (We won't see people like Robert Reich or Paul Krugman anywhere near the White House in the near or foreseeable future.)

The political arm of Wall Street, also known as the "Republican Party," is doing everything it can to keep pave the way for quick foreclosures and less regulation of lending and speculation. The PTR (formerly GOP) attacks on Elizabeth Warren are part of this offensive. (Note the simultaneous use of this word as noun and adjective.)

The Tea Screamers who, like most of the rest of us, distrust TARP, are too ignorant, arrogant and stubborn to understand exactly why TARP was as bad as it seemed. The bankrolling of this know-nothing movement by the Koch family didn't hurt in keeping the blinders on.

The decades-long movement from FDR to Obama may not reflect a complete U-turn in Democratic policy, but it is a veering off course of about 130 degrees or so. (Don't ask me how I invented that number.)

BTW: I just subscribed to the online NY Times. At least at this time in history, the paper represents about the best in daily, traditional American journalism. We should all help keep the paper strong. (Full disclosure: I am a daily reader of the Times -- as well as lots of other news sources.)

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