Has TARP Worked Exactly as Planned?
The Atlantic's Derek Thompson is feeling optimistic:
Bank of America has found it surprisingly easy to begin to raise the $34 billion dollars required by the stress tests, and public confidence in the banking system post-tests is up for the first time all year. The downside of bending over backward for the banks is all too evident: it's been ungodly expensive and the banks could be more difficult to re-regulate after this mess is over. But we've avoided a Lehman-esque castastrophe without electro-shocking public opinion with premature nationalization rumors, while keeping investors eager to capitalize the most troubled institutions. Not ideal, no. But not bad for a game of messy incrementalism.
If you understand the administration's financial efforts as partly driven by a desire to keep downside risk manageable rather than cataclysmic -- and I think that's how you should understand them -- then I think Derek is basically right. Things are working out pretty well. Not perfectly. But a failed bank nationalization is rather scarier, and quite a bit less survivable for the related politicians, than an imperfect, somewhat-too-costly, TARP program. And so far, the administration has managed to avoid nationalizing a major bank, and so has managed to avoid the risk of failing at nationalizing a major bank.
May 21, 2009; 5:45 PM ET
Categories: Financial Crisis , Solutions
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