The Benefits of TARP

The Congressional Oversight Panel evaluating the Troubled Asset Relief Program (TARP) concludes “…that the public ‘stigma’ surrounding the Troubled Asset Relief Program has constrained policy choices and may make it politically impossible to take similar rescue actions in the future,”  according to this article.

The Panel’s report says, “Popular anger against taxpayer dollars going to the largest banks, especially when the economy continues to struggle, remains high… The program’s unpopularity may mean that unless it can be convincingly demonstrated that the TARP was effective, the government will not authorize similar policy responses in the future. ”

That sounds like good news to me.

The Panel’s deputy chairman, Damon Silvers, told reporters, “As long as huge banks can count on taxpayer-funded rescues, we should not be surprised if banks take on enormous risks, knowing they can keep the profits if the banks win and shift the losses onto the taxpayers if he banks lose.”  It sounds like Mr. Silvers has a pretty good idea about why the angry taxpayers referenced above have good reason to be angry.

I’ve been critical of TARP in the past, so it’s nice to see that the program did have some beneficial effects too.

Randall G. Holcombe is Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America: Building Out of a Crisis (edited with Benjamin Powell); and Writing Off Ideas: Taxation, Foundations, and Philanthropy in America .
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