This will probably be my last post on TARP and the various bailouts. To me, this is a personal issue. I figured I should take a few minutes to explain why.
I have been a capitalist for as far back as I can remember. Where some people study and practice music, and are therefore musicians, I am a businessperson.
My two degrees are in business. I served my 13 years in Fortune 500 companies. I even took my life savings and hung out my shingle and now am one of the fortunate individuals who actually owns a profitable business.
As most folks who know me can attest, my belief in capitalism borders on the religious. I'm not the only one. For as far back as I can remember, others have espoused that the pain and excesses of capitalism, though distasteful, sometimes heart-breaking, and occassionally cruel, in the end resulted in a better world for everyone.
During the cold war, next to human rights, this belief in capitalism, more than our military differences, defined us as different from the Soviets. The Soviets had an economy that was run by a few talented minds. We had an economy that was run by millions and millions of minds.
In the end, it wasn't a contest. Our economy grew and prospered. Theirs died. It wasn't tanks in Europe that won the war. It was businesspeople like me.
TARP? It is rumored that one nameless congresswoman, on the day TARP passed, said, "I don't think it is too much of a stretch to say this may be the day America died."
I agree. The day TARP passed, it became clear that we were not a free-market society, run by millions of businesspeople. Instead, we are a command economy, like the Soviets, where regardless of merit, politically connected people prosper and the rest of the country suffers.
Those who think TARP was a good thing are basically in agreement with Tim Geithner when he says it was "deeply unfair", but that it was absolutely necessary.
To this, I have so many thoughts, but the main one is this: to embrace this school of thought, you have to believe in the following:
1. That the end justifies the means.
2. That the rights of people are not as important as the goals of the state.
3. That some companies which are big, well-connected and chock full of cash, should not have to bear the consequences of their actions.
Number 1 and 2 are straight out of my 8th grade civics book on the differences between us and the communists during the cold war. The biggest difference between us and them was supposed to be that we had rules. We followed them. Everybody had to follow them.
Even the rich and powerful had to follow them.
In communist countries? Individuals were inconsequential and only the state mattered. And that meant that the state could do anything it wanted, at any time, if it felt it would advance its goals.
That TARP was morally wrong is not even debatable. Even its most ardent supporters tip their hat to this fact, though they prefer to use terms like "unfair". However, the basic premise of unfairness is that it is wrong.
There isn't a person in America who defends TARP on moral grounds.
Problem #1: TARP was morally wrong.
So, the supporters of TARP then go on to say it was necessary. They said that without it, unemployment would rise over 8% and bank lending would stop. They turned out to be totally wrong on both those counts.
We passed TARP, unemployment shot up to 10% and businesses have a harder time than ever getting loans. In addition, it was supposed to stop mortgage foreclosures and it has been an outright failure at doing that.
The end result is that TARP saved the bankers and nobody else.
Would things have been worse without TARP? I'm not sure they would. How can I make such an extreme statement? Let me ask you this: Lehman brothers failed. Would things be better today if they were still around? of course not. In an economy this size, Lehman's collapse basically didn't matter in the long-term.
It caused a short-term shock, but frankly, it SHOULD have caused a short-term shock. It should have caused the kind of reaction that caused Wall Street banks to agree to reasonable regulation and change their irresponsible ways.
So, would ALL Wall Street banks have failed? No. Most of them weren't in that much danger. When TARP money was distributed, they literally gathered the CEOs of the largest banks in a room at the White House and told them they had to take the money.
What about the guys who didn't want or need the money? They were forced to take it so as not to stigmatize those who DID want and need the money.
A few more would have failed, but the majority of them were accessing other sources of capital to get them over a short-term hump. (See Warren Buffet and Bear Sterns for an example.) The strong would have survived. The weak would have failed. You know: capitalism.
The reality is that TARP was relatively small in impact relative to other actions by the government to prop up the banks, many of which are happening still, today.
So, the argument that it was necessary? I'd say SOMETHING was necessary, but TARP wasn't.
It asked for no sacrifices on the part of banks. It imposed no new regulations or safeguards (and only the true kool-aid drinkers are dense enough to think that Obama's Wall Street reform bill was written by anybody other than Wall Street). It was, frankly, a rushed piece of legislation that didn't accomplish its stated goals, but simply gave cheap cash to a few banks, many of which didn't want or need the cash.
This is like saying that a kid has fallen off their bike. They need some neosporin and a bandage. So, instead, they get skin grafts and 5 months in the ICU and the doctor harvests their kidney to pay the medical bills. Did something need to be done? Yes. Did what was done "work"... yes, in a manner of speaking. But was it the right thing to do?
Just like TARP, a well-intentioned, morally evil solution that solves the immediate problem is not the right thing to do. Not just from a moral standpoint, but from a practical standpoint as well.
Point #2: TARP was so badly executed and the desired results could have been obtained far better by many, many other solutions, that to say it was "necessary" is giving too much credit to a very, very bad solution.
Lastly, now the TARPoids are trying to say that TARP won't end up costing us anything in the long run. From a pure dollars and cents standpoint, that is probably true. Part of this is that the public's outrage over TARP was so obvious that they only spent half the money. They didn't dare spend the other half. As Bankers cashed their gozillion dollar bonuses, the voters became furious and everybody associated with TARP started to try and distance themselves from the outrageous behavior of the folks on Wall Street.
If left to their own devices, they'd have spent the other half. Democracy worked. They didn't spend the money.
So, did it cost us? You can say "no" only if you believe that there's no problem with a society where hard-working people are thrown out on the street while the millionaires and billionaires who caused the problem continue to rake in millions and billions.
So, to bring it back full-circle, from a social justice standpoint, TARP was a complete betrayal of America. It truly was the day America died.
It cost us. It cost us dearly. It laid naked the fact that the government exists only for the benefit of bankers and other politically connected types. It made all too obvious the fact that the government won't help an individual citizen, because an individual's rights simply don't matter in America. Only money matters, and only if the money can be counted in the hundreds of millions or preferrably billions.
I will vote out anybody who voted for TARP. I hope everybody else does the same.
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