Tarp Overseer Debunks Bailout Myths: Big Companies HAVEN’T Repaid Tarp Funds … And Funds to Help Homeowners HAVEN’T Been Disbursed

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Apologists for government bailouts push two main myths:

  • That all of the bailout funds have been repaid
  • That the bailouts helped the average American

But the official government overseer of the Tarp bailout program – the special inspector general for TARP, Christy L. Romero – has debunked both myths.

Today, Romero wrote the following to Congress:

After 3½ years, the Troubled Asset Relief Program (“TARP”) continues to be an active and significant part of the Government’s response to the financial crisis. It is a widely held misconception that TARP will make a profit. The most recent cost estimate for TARP is a loss of $60 billion. Taxpayers are still owed $118.5 billion (including $14 billion written off or otherwise lost).

And earlier this month, Romero stated that the portion of the Tarp funds which were supposed to help homeowners haven’t been disbursed:

A fund to support homeowners in the communities hit hardest by the collapse of the housing bubble has disbursed just 3 percent of its budget and aided only 30,640 homeowners in the two years since its creation, according to a report released on Thursday by a federal watchdog office.

The Hardest Hit Fund, which was created in the spring of 2010, grants money to state housing finance agencies for efforts to help families that are facing foreclosure. It has “experienced significant delay” because of “a lack of comprehensive planning” by the Treasury Department and limited participation by Fannie Mae, Freddie Mac and the large mortgage servicers, said the report by the special inspector general for the Troubled Asset Relief Program.

“Look at the TARP money that goes out to the banks,” said Special Inspector General Christy Romero in an interview with The Huffington Post. “That goes out in a matter of days. This has been two years and only 3 percent of these funds have trickled out to homeowners.”

Indeed, bailing out the big banks hurts – rather than helps – the American economy.  See this, this and this.   (And it doesn’t take a PhD economist to guess that using bailout funds to buy gold toilet seats and prostitutes is probably not the best way to stimulate the economy as a whole).

The only way to really stimulate the economy would be for the government to give money to the little guy on Main Street – instead of the big boys on Wall Street.  And see this.

Yet the big banks continue today to be bailed out through a wide variety of overt and hidden schemes … while the little guy gets nothing.

This is true even though the American people were opposed to the bank bailouts from day one, and continue to oppose them:

As I’ve noted since 2008, Americans are united in their overwhelming disapproval for bailouts to the big banks.

This has remained true right up to today.

As Rassmussen found only last month (as summarized by KXLF news):

Today’s Rasmussen Reports survey finds that most Americans don’t like bailouts for financial institutions.

60% Oppose Financial Bailouts; 74% Say Wall Street Benefited Most

Survey of 1,000 American Adults

***

• Just 20% think it was a good idea for the government to provide bailout funding to banks and other financial institutions, but 60% say otherwise.

• While many activists try to link the Republican Party and Wall Street, Republicans think the bailouts were a bad idea by an eight-to-one margin.

• Those not affiliated with either major party think they were a bad idea by a four-to-one margin. Democrats are much more evenly divided. Thirty-four percent (34%) of those in the president’s party say the bailouts were a good idea while 42% disagree.

• Overall, 68% believe that most of the bailout money went to the very people who created the nation’s ongoing economic crisis, but 12% disagree and 21% aren’t sure.

[And see this]

As the Washington Post’s Greg Sargent notes, the recent proposal from lobbyists to the American Bankers Association recommending ways to co-opt the Occupy movement accurately stated:

Well-known Wall Street companies stand at the nexus of where OWS protestors and the Tea Party overlap on angered populism. Both the radical left and the radical right are channeling broader frustration about the state of the economy and share a mutual anger over TARP and other perceived bailouts. This combination has the potential to be explosive later in the year when media reports cover the next round of bonuses and contrast it with stories of millions of Americans making do with less this holiday season.

(Except that it is the majority of Americans – not “extremists” on either side of the aisle – that share this anger).

The “Tea Party” movement was centered on the protesting government bailouts of the giant banks, before it was hijacked by the mainstream Republican party, Sarah Palin, Neocons and others. See this, this, this, this and this.

Ron Paul said last month at a GOP debate:

Bailouts came from both parties…. If you have to give money out, you should give it to people losing their mortgages, not to the banks.

And one of the most common sayings of Occupy Wall Street protesters is:

Banks got bailed out. We got sold out

(See this and this.)

Category: Bailouts

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

20 Responses to “Debunking Bailout Myths”

  1. NoKidding says:

    Yay, honesty. Ron Paul has all sorts of opinions I do not share, but he was the ONLY candidate in two straight elections that offered an actual change. Rhetorical change is set to defeat actual change for the second year in a row, as the media work to create excitement over the duel between banana republic flan and blooming desert flan. All of that bland slop being extruded in glowering, taunting malevolence.

  2. VennData says:

    Bastiat may have said ” that which was not seen” by Hank Paulson was The People. Paulson bailed out the banks, the banks were desperate. Sure some people were losing their jobs, 700K a month, but the banks, Wall Street, was collapsing. You can do with a million out of work, what does that compare to losing the money center banks?

    And he had a point, the problem was that the people who owned the banks, ran the banks, and financed the banks were left intact. The Bailout was a reverse neutron bomb. Nothing changed… and even after THAT the bankers may STILL have held the tinest of fig leaves over their exposed parts, but… but it was AFTER the bailout that sealed their place as the most reviledwhen the guys continued to pay themselves the big bucks, bonuses, and options. That was the real problem. Their was no culture of shame, no Japanese-like bowing, no asking for forgiveness.

    Why didn’t the bankers donate 100% of their pay to the foreclosure, unemployed, hungry and disabled? Why?

  3. mikecullin says:

    While the government is bailing out people who are under water on their mortgage and while they’re continuing to funnel funds to the banks, where management STILL makes unbelieveable amounts of money, how about a little for we renters? You know, the ones who have seen their rents increase from all that money sloshing around. You know, the ones that have to fund our friends’ mortgage deduction subsidies, not to mention the child credit subsidies…

  4. Iamthe50percent says:

    How but some for those of us who were prudent and bought houses we could afford? Bought houses to live in, not make money from? Did without 10 foot ceilings, granite countertops and three car garages?

    The ONLY thing the government should do is refinance those who can’t for because their LTV is over 100%. For the FULL amount of their loans. If anyone gets a principal write-down, then I want a principal write-down too.

  5. Petey Wheatstraw says:

    Until someone goes to jail for the blatant criminality that caused TARP to be needed in the first place, the looting will continue. Did anyone actually think this “plan” was doing anything to remedy the situation? Everything about our monetary and financial system is to support the “banks” (I use quotes because that designation covers a whole gamut of non-banking interests).

    The markets were up another 114 points today. Why? According to the Yahoo Finance headline, it was attributable to housing and profits.

    Right.

    Theft under the color of law is highly profitable.

  6. HarleyHoward says:

    The entrenched elites of the world, both political and financial, have formed a gigantic circle to blow smoke up each others asses! THIS TIME IS NOT DIFFERENT!
    The only way to correct this disaster is to get them all out, restore reason and responsibility, deleverage and default, reboot and start over.
    BUT, all of the idiots that created this mess should lose everything they sucked out of the system, before the collapse, knowing it would all collapse. Let them choose that or spend the rest of their lives in jail.
    Common Sense from the Heartland – http://howardwemple.com.

  7. louis says:

    Did anybody really expect anything else?

  8. Oral Hazard says:

    “[R]eality must take precedence over public relations, for Nature cannot be fooled.”

    Can never be said often enough.

  9. Stan Klein says:

    Beside the game being rigged, the government was in an impossible situation. Look at AIG, where a some fast talking bozos convinced the idiot CEO that there was no downside to taking people’s life insurance money and gambling it on credit default swaps covering rigged predatory mortgages. They did it to earn big bonuses for themselves. Do you let people’s life insurance go down the tubes? And the banks are fighting the kind of regulation that can stop this kind of nonsense and focus the risk on those in the banking culture. It takes away their “freedom” to be reckless with other people’s money for fun and profit.

  10. [...] TARP is not the grand success some would like you to believe.  (Big Picture) [...]

  11. [...] vs. Paul Krugman – Washington Post Can gold be used as a currency? – Salmon, Reuters Debunking Bailout Myths – The Big Picture H.L. Mencken was right – The Burning Platform Political Science [...]

  12. number2son says:

    While the government is bailing out people who are under water on their mortgage…

    Did you even bother to read the article before commenting?

  13. number2son says:

    And the banks are fighting the kind of regulation that can stop this kind of nonsense and focus the risk on those in the banking culture.

    And speaking of idiots, why is Peter Wallison still given the time of day?

    http://www.pbs.org/newshour/bb/business/jan-june12/wallstreet_04-25.html#disqus_thread

  14. BenGraham says:

    Regardless of whether someone is ‘against’ bailouts or not, this is not a fairly written post. The proper context to judge TARP is as follows: $475B was dispersed vs a $700B headline package; 75% of this was returned; the current projected loss is about 13%. Compare these facts, absent of framing bias, to whether the original headlines of $700B and expected losses of $300B are good or bad. Decide whether TARP helped and it’s current expected loss was wise given the facts at the time. Decide whether help to homeowners and stopping continuous corporate bailouts should have happened AFTER Tarp. It is stupidity to link ongoing bad policy with triage enacted in the heart of a crisis. Continuously bailing out banks (which I oppose) and failing to help homowners has nothing to do with saving the financial system after Lehman.

  15. Thatguy says:

    Stan Klein,

    Your Q: “Do you let people’s life insurance go down the tubes?” is a canard. The life insurance unit of AIG was well regulated and well reserved. Noone’s life insurance was going to be impacted by the collapse of AIG FP. The only impacted parties would be those suckers AIG FP sold CDS to (Goldman Sachs et al). This was actually reported on initially until they realized it removed a lot of the justification for the bailout and it was never discussed again.

  16. Kevin_In_Philadelphia says:

    I’m not an economist, just a lowly Big4 Auditor, but it seems to me that if there were going to be a bailout, it would have been much more equitable and logical if there were a few strings attached to the money: 50% principle write down and guaranted re-fi at the lowest rate – regardless of credit score – on every primary residence mortgage in the country. People stay in their homes and have additional funds to spend, the banks get some of the money owed to them by homeowners immediately, the states get a burst of sales tax revenue from the extra spending (due to consumers having what would have been mortgage payments as spending money). After that, the banks – and every other bailed out company – is on there own…gotta have failure if we are gonna call it capitalism, right?

  17. Frilton Miedman says:

    Kevin_In_Philadelphia Says:
    April 27th, 2012 at 11:00 am
    “…… it seems to me that if there were going to be a bailout, it would have been much more equitable and logical if there were a few strings attached to the money”

    ~~~

    Exactly, there’s little argument that TARP (and bailouts) was necessary.

    The horror of it all is that there were no strings attached – the result being all time record breaking onuses for Goldman Sachs employee’s that got us into this mess, while at the same time millions were losing their homes and jobs as a result.

    Without strings attached -
    Rather than use the money for constructive lending, they used it for prop trading, HFT, and other high risk/short term gains that are actually counter-beneficial to the economy/stock market.

    While Goldmans & JPM were reporting prop trading gains almost every single day- thanks to the tax money they were given, we were losing our shorts, and now the GOP wants us (non-billionaires) to foot the bill for it.

  18. WFTA says:

    I have asked this question before and no one has wanted to respond: In the fall of 2008 were there institutions or investors capable of playing buyer in an FDIC style, Friday night to Monday morning, takeover of a Citibank or BOA (or possibly two or three simultaneously)without paralyzing the economy?

    One thing is clear: TARP got done the way it got done because the 1% wanted it done and wanted it done that way. The 1% owned the banks, they owned the congress, they owned the administration; and on all counts they still do. Quelle surprise!
    Have a swell weekend.

  19. Kevin_In_Philadelphia says:

    @ WFTA,

    If there were private buyers waiting in the wings, wouldn’t that just compound the TBTF problem that got us here in the first place? Maybe multiple buyers taking the broken up pieces of these banks, but I wouldn’t want ot make a bad situation worse by combining all the crap under one roof.

    Totally agree with you on the American “ownership society”…how we aren’t just calling it fascism by now amazes me.

  20. Glen says:

    Banks got bailed out. We got sold out

    So true that. Business, including banks come and go all the time. Why we needed to save this particular bunch of insolvent banks has always been a puzzle to me. Threats to wreck the world’s financial system were laughable, why DC bought into this myth are also puzzling. Bankers that acted on that threat would have ended up in jail, and they still might if Americans can get their democracy back.