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Kudlow on TARP

Larry Kudlow's new piece at NRO, a reaction to the TARP Inspector General's report, is a must-read:

The IG's report also notes that what started last October as a single-purpose $750 billion effort to buy toxic securities has morphed into twelve separate programs that cover up to $3 trillion in direct spending, loans, and loan guarantees. In other words, TARP is nearly equal in size to the entire federal budget.

Now, Geithner & Co. has said very little about this. Even in yesterday's TARP oversight hearing, very little was said about the Barofsky critique. That's too bad, because this is a crucial area of investigation. TARP is badly in need of reform -- or maybe better yet, badly in need of termination.

Think about this: TARP, which is now linked to substantial criminal activity, has ballooned to the size of a second federal budget and represents the biggest government-directed intrusion into the economy in history -- vastly bigger than the New Deal. And not only is there TARP for banks, insurance companies, and non-bank financial institutions, but also for GM, Chrysler, and various auto suppliers, and perhaps soon enough for credit cards, newspapers, and other sectors of the economy.

This is why I believe the era of democratic free-market capitalism is coming to an end. It is being replaced by state-directed corporatism on a grand scale. This is central planning that goes way beyond the American tradition. (emphasis added)

Obama supporters can blame Bush for all of TARP's problems if they so choose, but Senate and House Democrats openly supported the plan and encouraged its implementation ASAP. President-elect Obama's transition team repeatedly announced support for expanded Federal government bailouts, specifically with respect to the auto industry and TARP II. And during its first 100 days, the Obama Administration has only talked more government bailouts and industry control, not less.

For the record, I agreed with the need for the first TARP cash infusion into banks in late September/early October 2008, because at the time there was tremendous concern, backed by what appeared to be solid evidence, that our major banks did not have the liquidity necessary to continue lines of credit. If short-term loans or lines of credit had in fact suddenly become unavailable for American businesses, we would have been in big trouble.

Opponents of TARP have continually argued that the amount of money involved, combined with the potential for both governmental and private sector abuse, meant that TARP was much more of a Pandora's Box than a panacea. Right now, it seems that their criticism was right on the money.


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Comments (16)

"In other words, TARP is ne... (Below threshold)
tomg51:

"In other words, TARP is nearly equal in size to the entire federal budget."

And isn't the current printing of additional money about that size, also?

"Obama supporters can blame... (Below threshold)
bryanD:

"Obama supporters can blame Bush for all of TARP's problems if they so choose, but Senate and House Democrats openly supported the plan and encouraged its implementation ASAP."-ml

i.e. George B. is a GOOD kid who got mixed up with the wrong crowd and helped the Crips burgle his grandparents' house.

It is rumored that George B. feels terrible about it but the rumor is unsubstantiated and could well be false.


TARP has never been about a... (Below threshold)
OLDPUPPYMAX:

TARP has never been about anything but confiscation, power and control. Tragically, Atlas continues to shrug.

Thanks BryanD.......right o... (Below threshold)
ODA315:

Thanks BryanD.......right on cue

Pass legislation in panic, ... (Below threshold)
GarandFan:

Pass legislation in panic, then you can repent at your leisure. Just wait until the bleating starts about the DEMOCRATIC pork bill.

But I'm sure Bryan will say that it's all George Bush's fault. Funny, but it's got Obama's signature on it. You know, the guy who was against earmarks, that signed a bill with over 8,000 EARMARKS in it. But hey, that was LAST YEAR'S bill, so it's okay. Nuance.

"But I'm sure Bryan will sa... (Below threshold)
bryanD:

"But I'm sure Bryan will say that it's all George Bush's fault. Funny, but it's got Obama's signature on it."-garand

Two things: Obama is proud to have his signature on it. It's what Democrats run for office to do (which is why I'm still a nominal Republican), namely, attach their names to bills seen as immediate, ameliorative and progressive. That's the pitch for the soap they sell. Did you just fall off a turnip truck?

The other thing, Bernake, Paulson, and (yes) Bush (ESPECIALLY Bush) premeditated the soaking of the taxpayers through TARP no later than mid-September 2008. By early October the only Republicans who refused to drink Bush's piss were Ron Paul, James Inhofe, and a couple others.

That's where Chapter 1 "The Set-Up" begins: inside the west wing of the White House during the Bush administration. All Bushco. Cheney was not even allowing Biden to visit the Vice-Presidential residence to measure for curtains. Remember?

Happy amnesia, or psychosis, or whatever.

Blaming Bush for ongoing TA... (Below threshold)
Roy:

Blaming Bush for ongoing TARP corruption is funny. Maybe we should blame Al Capone for all of the corruption today in Chicago politics.

My understanding has been t... (Below threshold)
Matt:

My understanding has been that Al Capone was responsible for a good bit of the corruption in modern-day Chicago. It's no longer his problem (may he continue to burn in hell), he didn't invent corruption in Chicago, but he fostered it. One of the things that facilitated Capone's rise to power was his very deliberately targeting and subverting the local politcal and judicial machine.

We can't deny that the Bush administration did set up and pass TARP which was deliberately left vague and and foggy. It's goal was to give Treasury great, extra-legislative control over the financial markets in this country (IMHO). Not "blaming" Bush, just observing.

That said we can't deny that the Obama administration has completely embraced TARP, expanded it greatly and defended it's lack of accountability and transparancy. Not "blaming" Obama, just observing.

Finally, where are the law suits challenging the constitutionality of TARP and similar programs? Institutionalized conservative groups are wailing and nashing their teeth, but what action are they taking?

Kudlow was the biggest che... (Below threshold)
hcddbz:

Kudlow was the biggest cheerleader for Trap. Saying how we would get a good return on investment and would allow for more government oversight. Then after a while he slowly came to the realization that his is horrid. This is prime example of slippery slow.

I all I can say is you ain't seen nothing yet.

"Then after a while he slow... (Below threshold)
bryanD:

"Then after a while he slowly came to the realization that his is horrid."-hcddbz

Well, Kudlow is on TV which has sound and saying "interesting!" would be inappropriate. His still-invited guest experts run 80% stupid on a good day. The purpose of TV financial coverage is SALES, SALES, SALES. If there wasn't the running ticker scroll on the bottom of the screen and the volume board no sane person would tune in at all.

bryanD - "The other thi... (Below threshold)
marc:

bryanD - "The other thing, Bernake, Paulson, and (yes) Bush (ESPECIALLY Bush) premeditated the soaking of the taxpayers through TARP no later than mid-September 2008."

You forgot the current TS and tax cheat, he was in on the drafting of the first tarp bill.

I would ignore everything K... (Below threshold)
hyperbolist:

I would ignore everything Kudlow has to say about economics (he's a pundit, not an economist), and follow closely everything this guy has to say about TARP and everything else related to the financial crisis. He was the first person to see it coming, and he's been right about everything since. Makes sense that the person who best understands the problem would be the one who best understands how to fix it.

Kudlow was wrong and was ma... (Below threshold)
hcddbz:

Kudlow was wrong and was man enough to admit it.
However all the Keynesian economics cheerleaders are still deluding themselves.

hcddbz: Roubini is a Keynes... (Below threshold)
hyperbolist:

hcddbz: Roubini is a Keynesian and has been more correct than every single supply-side economist on the planet.

Time for empiricism to triumph over ideology disguised as "common sense".

"For the record, I agreed w... (Below threshold)
dkAllen:

"For the record, I agreed with the need for the first TARP cash infusion into banks in late September/early October 2008, because at the time..." and "... Right now, it seems that their criticism was right on the money."

This is about fundamentals. The argument against economic statism is two-fold.

Point 1: The state does not, nearly by definition, have the ability to properly manage the economy. It is too complicated, and too dynamic.

Point 2: The amount of power which is aggregated to the state is directly proportionate to the amount of corruption in government, and the resultant misuse of that power.

The OP seems to imply that it seemed to be a good idea at the time, but that hindsight argues otherwise. However, points 1 and 2 deal specifically with this; they are fundamentals, which should direct decisions in the absence of clear information. TARP was always a bad idea, /based on the fundamentals/ -- i.e., the state meddling this directly in economics is /always/ bad, regardless of the particular situation.

ML should have known better.

There's a word describing t... (Below threshold)
Ruggy:

There's a word describing the situation we're in.

The word is clusterf*ck.




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