Oh Hay, What a Wonderful Success TARP Was!

You know what obscures facts sometimes? Opinion-free, neutral language. True! Here is the soothing language from yesterday’s Times: “Nearly a year after the federal rescue of the nation’s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid that many critics thought might never be seen again…. These early returns are by no means a full accounting of the huge financial rescue undertaken by the federal government last year to stabilize teetering banks and other companies…. But the mere hint of bailout profits for the nearly year-old Troubled Asset Relief Program has been received as a welcome surprise.” So, wait, what are they saying? They’re saying that the government has been repaid a small amount of the outstanding “loans.” And it made a profit on that small amount. And… well, take it away, Matt Taibbi!

I’m quoting long here because you should read it.

Since only a small portion of the debt has been put down by the best borrowers, and since the borrowers in the worst shape haven’t retired their obligations yet, it’s crazy to make any conclusions about TARP, pure sophistry. Moreover, a think tank set up to analyze TARP, Ethisphere, calculated in June that TARP was still $148 billion down overall, a debt of over $1200 per American. To start talking about what a success TARP is now is beyond meaningless.

The other reason for that is that it’s only a tiny sliver of the whole bailout picture. The real burden carried by the government and the Fed comes from the various anonymous bailout facilities — the TALF, the PPIP, the Maiden Lanes, and so on. The losses from the Fed’s purchase of distressed/crap Bear Stearns assets (Maiden Lane I) and AIG assets (MaidenLanes II and III) alone were as recently as late July calculated in the $8.6 billion range, and even that number is very conservative. Then there’s the trillion or so dollars that the Fed used on buying up mortgage-backed securities and Treasuries; we don’t know what their market value is now. And there are untold trillions more the Fed has loaned out in the last 18 months and which we are not likely to find out much about, unless the recent court ruling green-lighting Bloomberg’s FOIA request for those records actually goes through.