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I have written before about the no-good-deed-goes-unpunished syndrome, one acutely felt this year as Democrats have been blasted on the campaign trail simultaneously for having done nothing good and for having done nothing of substance.
They have been given little credit for an amazingly high level of productivity that includes–besides the blockbuster items of health care reform, the stimulus and financial industry reform–an army of solid legislative products ranging from credit card reform to the Lily Ledbetter Fair Pay Act to public land management and the regulation of tobacco by the Food and Drug Administration.
But nowhere is the no-good-deed-goes-unpunished syndrome more apparent than with the Troubled Asset Relief Program, passed during the Bush administration by the 110th Congress but clearly an electoral millstone around the necks of many Members of the 111th, Democrats and Republicans alike. From Rep. Bob Inglis (R-S.C.) to Sen. Bob Bennett (R-Utah), lawmakers have been vilified and sometimes dumped for supporting TARP.
Many lawmakers who voted for it have tried to get distance from it. Sen. John McCain (R-Ariz.), who suspended his presidential campaign to come back from Washington to try to save the package (remember?) and who voted for it, said during his Senate primary campaign earlier this year that he had been misled, even duped, to do so.
Tea party activists and liberal populists have joined in the vilification, portraying TARP as a $700 billion bailout that enriched bankers–the miscreants who got us into the mess in the first place–while the rest of the country saw their hard-earned tax dollars thrown into the sewer.
Voters generally agree; a Bloomberg poll showed that less than 30 percent of Americans think the bailout was necessary.
Here is the reality: TARP, which just expired, will go down as one of the great heroic acts of our lifetimes, an act of triage that saved the economy, perhaps the entire global economy, from a total credit freeze and an economic collapse leading to depression and deflation–at an absurdly modest cost.
Of course, TARP was, to say the least, imperfect. The original proposal from then-Treasury Secretary Henry Paulson was not a program at all, but in effect, a blank check for the Treasury chief to do whatever he saw as necessary to save us from the abyss. But Congress took the proposal and put some flesh on the bones, through a messy and difficult process that came close to collapse several times until it was rescued with bipartisan leadership.
Credit President George W. Bush, along with Paulson and Federal Reserve Chairman Ben Bernanke, the Congressional leaders on both sides of the aisle and both sides of the Capitol, and both presidential candidates for stepping up to the plate to overcome intense political pressure to reject any “bailout.”
The 111th Congress took another important step: It made sure that there would be vigorous and regular oversight of the $700 billion fund to avert fraud and waste.
To be sure, TARP ended up with three big flaws.
First, it did not take the huge array of troubled assets off the books of the banks as promised, with the goal of giving them the immediate liquidity to start lending quickly. And Congress did not provide the necessary impetus to push banks that did develop some liquidity to start lending the money instead of hunkering down to wait for a better day.
Second, the bailout of American International Group could have provided a better and fairer deal for taxpayers.
Third, the program should have done a much better job helping homeowners in trouble, with mortgages under water.
But the bottom line is a hugely positive one. The net cost of TARP to taxpayers will be perhaps $65 billion, maybe less. That is one-half of 1 percent of the annual U.S. economy–an incredibly cheap price to save the economy from utter catastrophe. The money infused into banks will be paid off with enough interest to turn a tidy profit for taxpayers. The AIG bailout will not result in a huge long-term loss. In the end, it is possible TARP may even make money!
It is worth noting that the same bottom-line judgment will ultimately apply to the bailout of General Motors and Chrysler. The failure to step in and keep these big auto companies from collapsing would have meant the recession would have been far more devastating, and not just in Michigan and Ohio, but all over the country where there are auto dealers, parts distributors, plants, steel mills and so on. Here, we are already seeing the payoffs. GM is growing rapidly in health, and the federal government will soon be able to sell its stake in it for a tidy profit for taxpayers.
But TARP and the auto bailout are exhibit A and exhibit B in the populist revulsion of a government seen as out of touch and out of control. One result already has been the purging of some top-flight lawmakers, such as Inglis and Bennett, and the nomination of extreme candidates whose major qualification is no connection to the real world of making policy in a complex and dangerous world.
No good deed goes unpunished, indeed.
Norman J. Ornstein is a resident scholar at AEI.
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