Frum: Politicians Pay The Price for TARP
David Frum writes at Marketplace.com:
David Frum: In the first days of the Obama Administration, early in 2009, an important decision had to be made. America's banks had racked up $1.5 trillion in losses during the financial crises -- more than their combined total capital. The banks were bankrupt.
Some economists argued that the best choice was to follow the example of Sweden in the 1990s: The government should nationalize all the banks, sift through the wreckage, transfer bad assets to a single government-owned "bad bank," and then return the cleaned-up banks to private ownership.
This option was shot down by Treasury Secretary Tim Geithner and economic adviser Larry Summers. They advocated government help to recapitalize the banks without taking them into government ownership. And that is what happened.
The private banking sector has now recovered its profitability. It is rebuilding its reserves, and the banks have repaid most of the TARP loans they received from the government.
Everybody happy? Far from it. The TARP bailout may have averted a global depression, but it violated just about every idea of fair play. Voters don't care that things might have been worse; you get no marks in politics for beating the spread. Dissatisfied voters seem almost certain to administer severe punishment to the administration in November.
Bailouts have become poison for Republicans too. In Utah, Republican Senator Bob Bennett lost his party's nomination in large part because of his vote for the TARP bailout.
You can save the world -- but still lose your job.
Politicians will learn different lessons from this story. Some will learn: Don't stick your neck out for anybody. But there's another possible lesson too: We're all headed to retirement sooner or later, whether we like it or not. It's not a bad thing to be able to tell your fellow retirees that you did something big and important during your time on the job.
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