The Troubled Asset Relief Program succeeded far beyond expectations. TARP: A success none dare mention

The Obama administration this week will mark the second anniversary of the collapse of Lehman Brothers and the ensuing Wall Street meltdown with an ironic bit of bipartisanship: letters of thanks to some of the congressional Republicans who helped fashion the government’s response in fall 2008.

No one in the Treasury Department is expecting any appreciation from House Minority Leader John Boehner, Senate Minority Leader Mitch McConnell or former House Minority Whip Roy Blunt for the gesture. In a reversal of the old adage quoted by President John F. Kennedy, that victory has a thousand fathers, there’s hardly a Republican who wants to be associated with perhaps the most successful and least popular American economic policy in the past decade: TARP, or as it is generally known, the bank bailout.


The Troubled Asset Relief Program is widely viewed as the original sin of the Obama administration — though it was put together under President George W. Bush and succeeded far beyond expectations. It’s widely seen as the tipping point for disgust with elites and insiders of all kinds — though it could also be seen as those insiders’ finest moment, a successful attempt to at least partially fix their own mistakes.

Rammed through Congress in the final months of the Bush administration by a political and financial establishment that felt it had looked into the abyss, TARP had the support of not just President Barack Obama but also his likely foes in 2012, such as former Govs. Mitt Romney and Sarah Palin. But it has been only sporadically defended, or even explained, by leaders of both parties who have shown decidedly little courage of their convictions.

“It’s become demonized on the left and the right by screamers — Glenn Beck and Rachel Maddow — who have no interest in the facts; they’re just interested in hyperbolizing and generating attention,” lamented New Hampshire Sen. Judd Gregg, a key player in guiding the measure through the upper chamber and one of the few Republicans willing to talk about TARP in positive terms.

Perhaps it’s not a coincidence that Gregg is retiring from the Senate at the end of the year — or that hardly anyone from either party is joining him in praising TARP.

While Obama last week made reference to having narrowly avoided another Depression, he and other leaders have generally avoided trying to explain that mechanism, in favor of trying to change the subject.

All that, despite a broad consensus of economists who think things would have been worse without the bank rescue — and perhaps far worse: In one simple example, American workers’ paychecks might well not have arrived. Think bread lines and cat food.

“The TARP is probably the most effective large-scale government program that the public has vehemently decided was a bad idea, and, therefore, has only the most tepid political defenders,” said the Brookings Institution’s Douglas Elliott. “Unfortunately, the right thing to do for the public just sounds so wrong to Main Street in this case.”

The policymakers who emerged shaken from a Sept. 16, 2008, briefing by Treasury Secretary Henry Paulson never managed to win credit for the apocalypse avoided from an American public furious at them for allowing the mess to develop in the first place.

And the rank and file in both parties have channeled that anger into an assault on members of Congress who voted for the measure. Politicians have spent about $80 million on ads this cycle mentioning bailouts — every penny of it negative — with Democrats spending the bulk of that sum, $53 million, according to an analysis by the Campaign Media Analysis Group’s Evan Tracey.

The attacks on the bailout are emblematic of an age that finds politicians generally scared of an angry electorate and “elitist” to be the ultimate dirty word.

“Both President Bush and President Obama deserve tremendous credit for having pursued that policy in the face of a withering, irresponsible attack from the left and the right, full of misstatements and representations about what actually happened,” Gregg said.

Polls suggest the public has only the haziest view of what TARP was. It’s often conflated — not least by politicians who voted for it and now seek to muddy the waters — with the stimulus, a piece of policy whose supporters and foes have fallen into a much more familiar debate about the role of government and public spending.

Even Nevada GOP Senate nominee Sharron Angle at one point referred to TARP as “the stimulus.” And few Americans seem to know that the banks at the center of TARP have paid the money back — with interest.

Pollster Ann Selzer asked voters this summer, “Do you think the Troubled Asset Relief Program, known as TARP, was necessary to prevent the financial industry from failing and drastically hurting the U.S. economy, or was it an unneeded bailout?”

Fifty-eight percent of Americans said TARP was unneeded. Only 28 percent called it “necessary.”

The consensus of economists and policymakers at the time of the original TARP was that the U.S. government couldn’t afford to experiment with an economic collapse. That view in mainstream economic circles has, if anything, only hardened with the program’s success in recouping the federal spending.

A study this summer by former Fed Vice Chairman Alan Blinder and Moody’s chief economist Mark Zandi was representative of that consensus. They projected that without federal action — TARP and the stimulus — America’s gross domestic product would have fallen more than 7 percent in 2009 and almost 4 percent in 2010, compared with the actual combined decline of about 4 percent.

“It would not be surprising if the underemployment rate approached one-fourth of the labor force,” they wrote of their scenario. “With outright deflation in prices and wages in 2009-11, this dark scenario constitutes a 1930s-like depression.

Back in 2008, that view was persuasive. Republicans like McConnell and Blunt swallowed their distaste for government action and persuaded their colleagues to vote with them for TARP. Liberals like House Speaker Nancy Pelosi and Massachusetts Rep. Barney Frank swallowed their dislike of Bush and distrust of the bankers.

“They did the right thing at very great personal cost — and in a very intense political environment,” said Tony Fratto, a former spokesman for the Bush Treasury and White House, who said he finds TARP’s persistent unpopularity “very, very frustrating.”

“To me, that was one of the most critical pieces of legislation ever passed,” he said.

The leaders he praises aren’t exactly campaigning on that record.

The Democratic leaders, on the whole, would rather not talk about it. “It’s a good premise, but he won’t want to comment,” an aide to one senior Democrat wrote when asked about a story on the gap between TARP’s success and its unpopularity.

One Republican sought to defend the bailout. In a direct-to-camera ad that came after he was booed for the bailout during his campaign for governor, South Carolina Rep. Gresham Barrett made the case for the tough vote.

“I honestly believe with all my heart that we were at a point where men and women were going to reach in their back pocket and pull out a credit card or an ATM card, stick it in a machine and nothing was going to come out,” he said. “You can always be a Monday morning quarterback. But leaders make decisions based on the best information that they have, and they go with it. That’s what I did.”

It appeared to do little good for Barrett, who lost badly to an anti-bailout outsider, state Rep. Nikki Haley, in the GOP primary runoff for governor.

Most other Republicans have infuriated their old allies on TARP by appearing to attack it. Boehner, in a speech demanding Treasury Secretary Timothy Geithner’s firing, twice spoke derisively of the “bailout” — though he didn’t attack the original TARP.

Blunt, who was key in 2008 to rallying support for the legislation in the House, finds himself under bitter assault from his Democratic Senate rival, Robin Carnahan, who has labeled him “Bailout Blunt.”

Blunt has responded by trying to accommodate voter anger with attacks on elements of TARP — he brags of having voted against dispensing its second $350 billion tranche, for instance, which allows him to say he opposed the full $700 billion bailout, and of having “voted against every bailout since that time.”

But Blunt, though he’s not advertising it, also stands by the program on its merits.

“Roy Blunt was concerned that the global economy was in a crisis in 2008 that could have been worse than the Great Depression and that doing nothing was not an option,” said his spokesman, Rich Chrismer.

The legislation’s outright foes seem to fall into two categories. Some are conservative Republicans and tea party candidates who believe banks should have been allowed to fail and that a dynamic private sector would have quickly righted the economy.

Some, like Sen. Jim DeMint (R-S.C.), were in position to vote that way at the time; others who weren’t in office then have embraced the position.

But many others — particularly Democrats — tout their opposition to the bailout on shakier ground. Carnahan, for instance, has been fiercely attacking Blunt for his role in passing TARP.

Her spokesman didn’t respond in detail to a question about what she would have done to avert economic collapse. Instead, he e-mailed a statement attacking Blunt and suggesting that legislation should have looked to “private-sector alternatives” and “property accountability measures.”

And the website FactCheck.org recently noticed that five freshman Democrats were touting their votes against the “bailout” when they weren’t even in office for the original legislation and had voted on the second tranche or other measures.

Spokesmen for two of them defended the characterizations but conceded that they did support the massive government action at the heart of the bailout — just with “more teeth” in the form of bank regulation, as Andrew Stoddard, a spokesman for Nevada Rep. Dina Titus, put it.

Brad Bauman, a spokesman for Ohio Rep. Mary Jo Kilroy, put it more bluntly.

“She supported buying toxic assets,” Bauman said. “She did not support the Great Depression.”