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Thursday, October 21, 2010

"Are You Happy Or Angry That The Government Has Made 8.2% on TARP?"

Stan Collender has a question for you:

Are You Happy Or Angry That The Government Has Made 8.2% on TARP?, by Stan Collender: This story from Bloomberg reporters Yalman Onaran and Alexis Leondis is making the rounds in the blogosphere today.  According to an analysis conducted by Bloomberg...

The U.S. government’s bailout of financial firms through the Troubled Asset Relief Program provided taxpayers with higher returns than they could have made buying 30-year Treasury bonds -- enough money to fund the Securities and Exchange Commission for the next two decades.

The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies, an 8.2 percent return over two years, according to data compiled by Bloomberg. That beat U.S. Treasuries, high-yield savings accounts, money- market funds and certificates of deposit.

But as the story also notes, "Democrats are struggling to turn those gains into political capital..."

How is it possible that an investment that makes the federal government look like it has the smarts of Warren Buffet is such a hard sell with voters?

Part of the reason may be that voters think the 8.2 percent is coming out of their rather than the financial institutions' pockets.  At least that's what I heard at several focus groups I observed earlier in the year.  The participants in the focus groups bristled when they were asked about the profits the government was making on TARP.  Rather than be happy about it, they insisted that the banks were repaying the TARP funds and interest with higher fees that customers were being charged rather than by reducing other costs or lowering dividends.

It was almost a perfect example of a total no-win situation.  They would have been angry if the government lost money and they were definitely angry that it was getting paid back.  They would also have been angry if the government had made no attempt to deal with the situation, that is, if there had been no TARP, and they were clearly irate at everyone who had anything to do with it being enacted.

Because of this, not only is turning the latest TARP results into political capital always going to be difficult, but just keeping it from being a complete negative may be impossible.

People I talk to, people I think should know better, tell me that it would have been better to let the system crash and burn. As far as I can tell, and this is admittedly anecdotal, the idea that TARP saved us from a greater catastrophe hasn't taken hold with the public.

    Posted by on Thursday, October 21, 2010 at 12:42 AM in Economics, Financial System | Permalink  Comments (82)


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