Monday, November 01, 2010


The comment from Lodo came, not apropos of the post it was on but certainly an apt continuation of a conversation we've been having here for some time.

The comment was thus:
All that TARP money everyone was harping about has been paid back with interest.
We've been tossing ideas back and forth about the TARP and various government bailouts. My point is that the financial bailouts in toto are a bad idea because of the monetary cost and the long term cost of cultivating a culture reliant upon bailouts instead of sound business judgment.

Lodo's point is that, as a practical matter, the bailouts and stimulus plans are necessary to stabilize the economy. And whatever the risks happen to be, they're better than the certainty of a second Great Depression (I hope I've characterized the point fairly).

So, it's only fair for Lodo to point out that all of the TARP money has been repaid in full, with interest. I assume he's referring to a White House report that was released last month.

Now, I have no reason to think the White House would tell us something that isn't 100 percent true. What motivation, after all, could they have for not being completely forthcoming about a program as popular as TARP has been — especially in this climate where pretty much everyone is strongly in favor of doing all we can as a country to make sure that the poor banking executives make it through this trying time of tumultuous tribulation with their multi-million dollar bonuses intact?

I mean, what could they possibly gain especially since their party is poised to make such great gains during this election season?

But, out of habit I guess, I just had to do some double checking on this claim "fully repaid with interest." So I jumped over to one of the only journalistic enterprises I know of that still has any integrity left. The amazingly awesome website ProPublica.

ProPublica maintains a Bailout Scorecard website, where they track how much taxpayer money has gone to whom and how much has been returned. And incredibly, the numbers they have on their site show that not only has the TARP program NOT been repaid in full with interest, there is still almost $170 Billion in loans/investments outstanding.

I just found this almost impossible to believe. I was shocked, SHOCKED, to learn that there may have been a bit of fibbing going on from the White House.

I just assumed that perhaps the database at ProPublica may not have been quite up to date. So I fired off a quick email to one of the contact email addresses listed on the site…
Hey Paul,

Let me first say how much respect I have for the ProPublica organization. It has become one of the only news sources I really trust. Thank you for your efforts.

My question is about the Bailout Tracker portion of your website (, specifically the information on TARP. When the White House recently announced that all TARP money had been paid back in full with interest, I thought I should really check with you guys before I believed them.

So I looked at your site and saw that, according to you, there is still quite a bit of TARP left outstanding. I just wanted to check to see if the numbers on your site have been updated recently.

Thanks again for the great work you guys are doing.
Within a few hours, Paul wrote back…

The short version is if you really listen to what the White House is saying, they’re not saying all the money has been paid back. They’re basically saying that they expect the money to be paid back eventually. Our database shows things as they currently stand (and yes, it’s up to date). Even if the administration is right and we’ll be paid back, that won’t happen for years.

Separately, you have to be careful when talking about this stuff whether you’re including Fannie and Freddie or just the TARP. We include Fannie and Freddie in our database because, even though it was a different pot of money, it’s still one of the big bailouts that was started in the fall of 2008. And as you can see from our site, that’s involved nearly as much money as the TARP, and it seems like it won’t be long before there’s more outstanding from that bailout than from the TARP.

Also, here’s a recent roundup post we did on the 2 year anniversary of the TARP:

So, there you have it. Don't take my word for it, I'm just a cave man. Take the word of someone who tracks this stuff for a living and who doesn't have a political interest in trying to make everyone feel like hope and change will get us out of this mess.

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  1. Well you're definitely right about one thing, that original comment I'd left had absolutely no relation in mood or topic to your post. Geez! Really bad behavior on my part there.

    Of course in regards to the TARP money and all that, ...I think you kind of glossed over the "avoid the next great depression" aspect of the argument for TARP. Just might be a few old folks who appreciated that gesture by their government.

    Till next time Emawck!!!!

  2. Yeah. I can see that avoiding the next Great Depression is probably the strongest argument for the bailouts. I guess I'm just not convinced that we've done that. I kind of think we've had it too good for too long and we're due for a crash.

    I just can't see how borrowing and spending and then borrowing even more to cover your expenses then borrowing even more… and more… etc. is a sustainable strategy.

    In short, there will be another Great Depression, and the longer we put it off, the greater it will be. As someone with two young kids, I'm ashamed of what we're doing to them.

    PS-- Wasn't trying to bust you balls on the appropriateness of your original comment. Just trying to provide contest. As always, your comments are welcome here.

  3. The problem of bailouts is that the potential for same removes the possibility of failure, a possibility which drives innovation and responsiveness to consumers. Additionally, they artificially push capital in to areas of the economy which, were they performing successfully, wouldn't need, thereby limiting capital for more productive uses.

    As for the "next Great Depression" argument, who do we know the bailouts prevented that? How do we know that the economy wouldn't be doing better, had the American people retained a Trillion Dollars in their pockets to buy/invest as they saw fit?


  4. No offense taken Emawck. And I do think I was wrong to come out of nowhere with a bunch of politics.

    In regards to R. Shermans' comment and the possibility that America could conceivably be doing better w/ out the bailout, can you (Sherman) name three prominent economists who would support your theory? And what would have been the human ramifications if you (or they) were wrong? I'd say it was worth it.

    Personally, I think people forget that this whole system is artificial. Borrowing and spending is fine because in the end, its all just a farce anyway. That dollar in your pocket, it stopped being backed by gold back in the early '70's. Its just painted paper. When you spend a dollar, its just an agreement between you and your retailer that you're going to continue to play the game. And as long as its in the interest of enough people to play, the game goes on.

    The real problem is that a given truism of Capitalism--mainly, that new products and new ideas will always yield enough new jobs is...well, no longer true. Computers and technology require less labor; and when its needed, there's plenty of cheap labor overseas. Too much labor for Capitalism to sustain. That computer you have at home is like Funzo the Christmas toy from that great Simpsons episode. It destroys all other toys and makes them obsolete. That's a problem were not going to solve soon since no one in America's heartland wants to admit that China's one family one child policy is probably what all countries should be following.

  5. My point Lodo was not to advocate for a specific course of action, but to suggest in a system as complex as our economy, arguing that one tweak --even a trillion dollar tweek-- will prevent the apocalypse is akin to the witch doctor looking at his tribe during an eclipse and saying, "give me ten pieces of silver, and I'll bring the sun back."

    Further, you cannot ignore the hidden costs of those bailouts, whether in terms of diverted capital or in the reckoning which is bound to happen.

    Of course you're correct on the fiat nature of money, though the same is true of gold. It represents something else. That is it represents the fruits of one's own labors.

    Which brings us to the creation of wealth. I'm a lawyer. I trade my brains to other people for something I value more than mulling things over in my head. They may write me a check, but that check represents my water bill, house payment, food, clothes, car etc. My clients value my advice more than the money they hand me. Although it may seem like an even trade, both my clients and I are better off. They have a problem solved and I buy a take-out pizza. Win-Win.

    You suggest, however, the pool of ideas and innovation, the trading of which creates wealth, is essentially stagnant. Really? Do you own and IPad? Or a cell phone? Those things were unheard of and generally outside the realm of comprehension just 30 years ago. Somebody had an idea and traded the fruits of his labor/mind for a big house in Seattle, and a lot of other people did well, too.

  6. Sherman:

    Money doesn't always represent the fruit of one's own labors. Not by a long shot. Just look at George W. Bush. Or one of a million trust fund kids who inherited a ton of money for doing nothing. Its amazing how people complain about food stamps or unemployment checks (which to an extent they should); yet have no issue with some no talent jerk-off inheriting $150 million dollars just for being born.

    But I digress, which I believe you did in the last (2) paragraphs of your comment. Im confused as to how Ipads or cell phones have have created jobs. They've shifted jobs and employment from one sector to another and created "wealth" for a few with a specific type of expertise; but not real jobs for the mass of labor looking for work. Ipads and cellphones have destroyed jobs and whole industries. No need to mail letters anymore. No need to own a watch. Or a camera. Or a calendar. Or have a secretary. Or hire an accountant at tax time. I can definitely go on and on.

    Capitalism requires that a business either 1) earn more profits; or 2) spend less so it can keep more of its money. Business will always cut labor when it can, and its doing it. Eventually (as Jimmy Hoffa famously told Henry Ford) replace enough workers with robots and there will be no consumers with money to buy your cars. And that was before outsourcing was a big issue, so add that in there a well.

    But whatever. Some people need to buy into free market capitalism. It justifies their wealth (not that I know anything about you personally. I'm just saying in a general sense).

  7. Lodo, you are perhaps correct regarding the digression. However, you tossed a lot of topics into the prior comment, any one of which would inspire a response/full post on its own. I shall endeavor to respond, my friend and shall point you to the response in my copious free time.

    A Friendly "Cheers,"

    BTW, which may be apropos, the word verification is "gambl."


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