The debt hawks are to economics as the creationists are to biology.
If you’ve joined the millions who believe TARP (Troubled Asset Relief Program) didn’t work, you’ll enjoy these excerpts from a NY Times article, titled, “Bailout Loss Estimated at $29 Billion,” by Louise Story, October 5, 2010. The article quotes from a Treasury Department report:
“The Treasury Department expects to lose $29 billion on the federal bailouts . . . the cost is far below the $350 billion the Congressional Budget Office once estimated. ‘Because of the success of the program, TARP will likely cost a fraction of this amount,’ the report said.”
This means the federal government actually pumped only $29 billion TARP money into the economy. This “too little-too late” approach explains much of the reason why the recovery has been so slow.
“Recently, the Congressional Budget Office put the cost at $66 billion. [...] The Treasury arrived at its figure by adding in profits that it expects to receive on shares of A.I.G. stock.- – – a $22 billion profit. Without those shares, the Treasury would have reported a $51 billion loss, rather than a $29 billion loss, the report said. “In total, the Treasury has received back about $204 billion of the bailout funds, or just over half of the money it doled out.”
Federal profits are identical with federal taxes. They represent money taken from the economy. Taxing the economy $204 billion is a poor way to stimulate the economy, and again shows why the recovery has been slow.
“Nearly 80 percent of the money given to banks has been paid back. The Treasury also received $26.8 billion from banks through interest payments . . . The report did not break down the sources of the automobile losses. The government gave the most money to General Motors and is seeking to recoup some through an initial public offering.”
This should read, “Nearly 80 percent of the money given to the banks has been taxed back.”
“The Treasury plans to give A.I.G. $22 billion more. That money will help A.I.G. pay down its debt to the Federal Reserve of New York.”
The federal government will give AIG $22 billion, then AIG immediately will give it back. Only in Washington could this be considered an economic stimulus. So did TARP work? What TARP?
Rodger Malcolm Mitchell