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TARP Helped but at Great Cost

Discussion in 'BBS Hangout: Debate & Discussion' started by rocketsjudoka, Oct 21, 2009.

  1. rocketsjudoka

    rocketsjudoka Contributing Member
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    It looks like TARP did what it was supposed to and save the financial industry at the moment of crisis but after that it is decidedly mixed.
    From AP

    http://www.msnbc.msn.com/id/33405209/ns/business-stocks_and_economy

    Watchdog: Bailout helped but at a great cost
    ‘Less-than-accurate’ statements, lack of transparency hurt program


    WASHINGTON - A government watchdog said the $700 billion bailout for the financial industry played a major role in rescuing the economy over the last year but also engendered anger and distrust among Americans because of secrecy and confusion about the way the program was handled.

    The mixed and blunt assessment by Neil Barofsky, the special inspector general in charge of oversight for the bailout fund, appears in a quarterly report scheduled for release Wednesday. Barofsky said the Troubled Asset Relief Program has come at great cost to taxpayers, to the integrity of the financial system and to the public's perception of the federal government.

    "Despite the aspects of TARP that could reasonably be viewed as a substantial success," he wrote, "Treasury's actions in this regard have contributed to damage the credibility of the program and of the government itself, and the anger, cynicism and distrust created must be chalked up as one of the substantial, albeit unnecessary, costs of TARP."

    Barofsky said public suspicion was fed by Treasury's decision not to require banks to report how they used their rescue money and its "less-than-accurate" statements describing the financial condition of nine large banks that benefited from large infusions of aid. The TARP program began under the administration of President George W. Bush and has expanded under President Barack Obama.

    Criticism
    The program has come under criticism in Congress from across the political spectrum. Liberals maintain the program needs to shift its focus from big financial firms to small businesses and homeowners. Conservatives insist the program has been an unnecessary intrusion into the financial sector and should end swiftly.

    On Wednesday, Obama is expected to announce a new TARP program to assist community banks. The American Bankers' Association has asked for $5 billion in rescue-fund money to help small banks extend more loans.

    In his report, Barofsky credited the Federal Reserve and the Treasury Department for adopting some of his accountability recommendations over the past several months. But he said several of his agency's proposals for greater transparency have gone unheeded.

    The report describes a patchwork of initiatives carried out under the TARP umbrella — some designed to assist the biggest of Wall Street institutions, others to bail out the struggling auto industry and yet others to help homeowners struggling to stave off foreclosure.

    Even within those programs, Barofsky found inconsistent attempts to hold recipients of the bailout accountable to taxpayers.

    For instance, General Motors, which received $50 billion in government assistance, has an internal guideline that generally prohibits employees from flying in private jets for business travel. Bank of America, which received $25 billion, has the opposite policy, encouraging senior management to use corporate aircraft "for safety and efficiency purposes," the report states.

    Bank of America, which reported losses of more than $2.2 billion in the third quarter, had nebulous guidelines for luxury expenses. "Reasonable expenditures occur when the costs of entertainment or events do not exceed the expected benefit to the corporation," according to the company's four-page policy.

    Chrysler's policy, on the other hand, runs for 15 pages and lists specific prohibited expenses, including spa services, country club dues, tuxedos and shoe shines.

    Overall, Barofsky said the cost of preventing a financial collapse fell into three categories:

    Taxpayers: The government has spent more than $454 billion through TARP programs. Forty-seven TARP recipients have paid back nearly $73 billion. That means more than $317 billion remains available. The program is set to end Dec. 31, but the administration could seek an extension until next October. Despite the repayments several of the program are not expected to yield returns to the taxpayer, including a $50 billion mortgage modification plan and some of the money injected into auto companies.
    The integrity of the industry: Many firms considered "too big to fail" last year, and thus in need of government assistance, are even bigger now. "Absent meaningful regulatory reform, TARP runs the risk of merely reanimating markets that had collapsed under the weight of reckless behavior," the report sates.
    The credibility of the government: Barofsky wrote that public antipathy for the bailout is fueled by "the lack of transparency in the program." Over the course of the year, Barofsky has called on the Treasury Department to seek more information from banks on how they use their taxpayer assistance.
     
  2. thumbs

    thumbs Contributing Member

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    Call TARP for what it is -- Obama's campaign slush fund. The bulk of the funds are slated to be spent just before the 2012 elections rather than now when they could help.
     
  3. pgabriel

    pgabriel Educated Negro

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    being an Obama supporter, I'm glad Bush came up with this slush fund idea before the 08 election. so his presidency was so freaking bad that we elected a black man with a "funny" name and he set up a slush fund. that dude was looking out for barack from day one?

    ---> :rolleyes:
     
  4. Sweet Lou 4 2

    Sweet Lou 4 2 Contributing Member
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    It's a shame that TARP didn't come with regulatory reform that is badly needed.

    I don't think this is a failure of Bush nor Obama, just a failure of our political system in general.
     
  5. SamFisher

    SamFisher Contributing Member

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    And we'll continue to call you for what you are - a complete idiot.
     
  6. Rashmon

    Rashmon Contributing Member

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    When it comes to making sense of this political stuff, you're all thumbs.
     
  7. rocketsjudoka

    rocketsjudoka Contributing Member
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    Beat me to it..
     
  8. deepblue

    deepblue Member

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    The article said TARP is set to end on Dec 31, or next October if its extended.

    I think they are finding it pretty hard to spend the the money on something that works. Programs like ppip have so far flopped.
     
  9. Major

    Major Member

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    Do you just make this stuff up? Let's see the problems with your statement:

    1. TARP won't exist in 2012. At the longest, we're probably looking at late 2010.

    2. There are no significant plans to spend the available $300+B in TARP money. The article noted one $5B program. The majority use was in the immediate aftermath of the crisis - before Obama was in office.

    3. TARP isn't popular. Giving a bunch of money to banks in 2012 doesn't seem like the most effective campaign tactic.
     
  10. Invisible Fan

    Invisible Fan Contributing Member

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    Stigma of decay and Congressional intervention will do that.

    Even if the company really needed the funds....
     
  11. Air Langhi

    Air Langhi Contributing Member

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    If 74 of 453 is repaid where is the rest?
     
  12. pgabriel

    pgabriel Educated Negro

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    agree, it would have taken months to implement because of politics and by then who know what would have happened to the banking system.
     
  13. rhadamanthus

    rhadamanthus Contributing Member

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    I also agree, and I b****ed about it from the get-go. Major told me it was impractical, to which I retorted that delaying it was dooming regulation to futility.
     
  14. thumbs

    thumbs Contributing Member

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    Okay, my apologies for confusing TARP with economic stimulus. I'm not the only one, though:

    http://oswegodemocrat.blogspot.com/2009/02/differences-between-tarp-and-economic.html

    Oswego Democrat
    We provide the Democratic Point of View on news and events.
    This Blog Linked From Here My Blog List
    This Blog

    Sunday, February 1, 2009
    The Differences Between TARP And The Economic Stimulus Package


    by: robert.harding

    It has been brought to my attention that there is some confusion over two very different things. There is confusion over the American Recovery and Reinvestment Act of 2009 (also known as the economic stimulus package) and the Emergency Economic Stabilization Act of 2008, also known as the Troubled Assets Relief Program (TARP).

    Some people have taken liberties with both, lumping TARP in with the economic stimulus package and saying that they oppose the economic stimulus package because of TARP. However, TARP was not meant to stimulate anything. TARP's goal was to buy up $700 billion worth of troubled assets. In the House, TARP passed with a 263-171 vote. Of the 263 representatives that supported TARP, 91 were Republicans. And those 91 Republicans included some of the same loud-mouthed Republicans who are dismissing the economic stimulus package. Republicans John Boehner, Eric Cantor, among others.

    The only sector TARP helped was the financial sector. There was no stimulation with TARP. The Treasury Department was handed a blank check (with zero accountability) to buy up troubled assets from banks and other financial institutions. The first $350 billion of that money has already been spent, but no one knows where it went. There were a lot of people in Congress who were nervous about releasing the second half of the $700 billion because of the lack of accountability and oversight.

    But the economic stimulus package is different - very different. The package passed the House with a 244-188 vote. Zero Republicans supported the stimulus package. The Republicans are quick to point out that there is money for birth control and other things in this bill, but they aren't quick to mention all of the contents of the package.
     
  15. Major

    Major Member

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    The vast majority of the stimulus spending is spread between 2009 and (more so) 2010. There's still some beyond that, but it's a relative trickle by 2012.
     
  16. gifford1967

    gifford1967 Contributing Member
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    Not to mention that it makes absolutely no political sense for Obama to hold stimulus funds until just before the 2012 election. Any political benefit Obama garners from stimulus funding will come from demonstrated improvement in the economy/job creation. It's to his benefit if all of the stimulus funds were spent immediatlely, to allow as much lead time as possible for them to work. Thumbs doesn't understand the most basic political dynamics.
     
  17. rimrocker

    rimrocker Contributing Member

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    Helped? I guess it depends on how you define help. I don't see how the fundamentals that were in existence before the crash have significantly changed except for the fact that it gave people a chance to put on a fake smile to fool themselves and our ability to respond to a new phase of the crisis is much less.

    I am not optimistic and there are still huge amounts of losses out there that aren't being reported because of stupid accounting tricks (and probably huge amounts of false profits). We should have swallowed our medicine last year... taken time to get a good bill with real reforms... now, the pressure is off and we can pretend things are OK.

    The response to this financial crisis is one of the big criticisms I have of the Obama administration. I hope they are biding their time because they placed a greater importance on getting health care passed and that they plan to come back to some necessary structural overhaul of our financial system, but I am quite wary.

    This was a gauze bandage on a severed leg. The blood will leak through and start flowing again soon enough.
     
  18. DFWRocket

    DFWRocket Member

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    Sweet Lou, these kind of rational, open-minded thoughts don't belong in the D&D, please limit your posts to Name-calling, mud-slinging, and one-sided thinking like everybody else please. :D
     
  19. juicystream

    juicystream Contributing Member

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    The banks spent it to cover losses, and of course to give out employee bonuses.
     
  20. thadeus

    thadeus Contributing Member

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    TARP is the biggest case of larceny that has occurred in the history of the United States.
     

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