|>> The Bush administration bailed out a huge swath of financial firms under TARP. By your logic, why weren't they allowed to go bankrupt instead? Let the market work in the normal way and avoid moral hazard.|
I opposed TARP at the time, but in retrospect, it was essential and was not in any way corrupt. TARP, more than any other government action, was responsible for keeping the economy afloat and Barack Obama should thank his lucky stars the Bush Administration had the good sense to do it. It was, by any measure, the right thing to have done, no matter how much some of us thought otherwise at the time.
Without TARP you would have had an absolute financial collapse that would have made the financial crisis look like a blip. And TARP, ultimately, will cost the taxpayers relatively little money, certainly compared with the absolute waste of the Obama stimulus bill (for which we got nothing of value at all).
As a general rule, I don't believe the government ought to be meddling in the financial affairs of business. But even Milton Friedman would, IMO, have supported TARP (just as he supported the actions of FDR in the 30s). There are times when government can intervene and do something that no one else can.
This was not the case with GM. Had GM been allowed to "fail" (which simply means it would have gone through a Chapter 11 process without the corrupt interference of the administration) it would have come out the other side stronger. And the unions, which caused GM's problems in the first place, would have been neutered or at least beaten down. The Obama process empowered them.
>> They're the ones that shoveled the first trillion into the beast.
That is not an accurate characterization of what happened. TARP was principally loans that have been repaid in substantial part and are likely to very close to fully repaid. This is in no way similar to the "shoveling" that has happened since, which has consisted of money being flushed down the drain, mostly in the form of disguised political payoffs. Furthermore, TARP did not create a systemic exposure for the taxpayer the way subsequent legislation did.
Don't get me wrong: there can be legitimate debate about whether TARP was the right thing to have done; however, it was not a corrupt, politically driven process as we've seen in the last three years -- TARP was handled in a rational, analytical manner for the most part IMO. I think years from now people will recognize that it didn't feed the monster the way the subsequent legislation did; in effect, it amounted to loans to get through the cash flow crisis that simply couldn't have happened through private money.
In the crisis that happened during the Clinton years (the collapse of the hedge fund -- can't remember the name of it) large banks were called on to come up with something like 6 billion over the course of a weekend and they managed to do it. There is simply no way they could have come up with the kind of money necessary to hold it together.
As I said, I opposed it at the time, but in retrospect it was maybe one of the most impressive actions I've seen our government carry out. It didn't solve the problem, of course -- the real problems lie ahead, but at least it gave the country an opportunity to get its shit together. Unfortunately, the current nonexistent leadership has failed miserably to respond, and we're in a much more serious crisis now than we were three years ago.