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The government's pretty-good investment, cont'd

One of the working theories in Washington is that if voters knew that the government -- and thus the taxpayers -- were likely to make a profit on TARP, they'd like it better. Not so, says Stan Collender:

Voters think the 8.2 percent [return on the financial bailout] 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.

By Ezra Klein  | October 21, 2010; 9:00 AM ET
Categories:  Budget  
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Comments

The return on TARP is going to be pretty insignificant next to the liabilities for Fannie Mae and Freddie Mac.

I would submit that voters aren't bifurcating the individual policies. They are looking at the total costs of TARP, the stimulus and Fannie & Freddie as one big future bill.

Posted by: jnc4p | October 21, 2010 11:03 AM | Report abuse

The "TARP Profits" are pure political trickery. The banks are still using government money to cover their ridiculous losses, but by separating the TARP amount from all the hidden subsidies the Banks are allowed to completely avoid oversight and go on paying out ridiculous bonuses based on phony accounting and falsely-inflated assets.

But you know, bailing out the bankers is bad, but immunizing them from committing fraud on every single person who took a mortgage OR who invested in Mortgage backed securities is worse. The single truly bipartisan issue in America is that corporate fraud that victimizes Americans is A-OK.

Posted by: Bullsmith1 | October 21, 2010 11:25 AM | Report abuse

Again, Ezra, I gotta say this approach is all wrong.

Voters don't like government interfering in private industry. I don't like it. You don't like it. None of us like the concept of it and whether it makes money or not is not the issue.

The issue is it happened. Bush did it. It worked. I was wrong. Many people were wrong. TARP helped save America. Bush should be given one big huge Thank You by the DNC and members of congress for his ability to do what was unpopular and institute a very large, expansionist, tax-payer funded takeover of the lending and insurance industries. Make the GOP own this!

Part of TARP's unpopularity arises from the GOP and Fox News' insistence that it's un-American to do it. Guess what? They did it. Bush and the GOP did it. And it worked. Yet again, despite their campaign stump of small government, super capitalistic loving patriots, the GOP has another legacy of huge government expansionism and a policy that flies in the face of everything they claim to believe in.

More than that, though. It worked!! Their very own core-principles didn't. Big Government did!!!

In short, the most successful Bush-era policy is TARP.

Make them own it, EZRA!

Posted by: Chris-TheFold | October 21, 2010 12:01 PM | Report abuse

It's not surprising people react badly no matter what angle they look at it. It's like if your tour bus driver wanders into the wrong lane for not paying attention then does a miraculous job of avoiding a crash. Are you happy with him? Both players here, the banks and the gov, messed up big time. The banks crashed the economy, the gov let the banks run wild. Dodging the traffic does not make it all right. The one thing that would have helped was if the bailout had come with strings that required the main culprits to become paupers and unequivical rule changes that the banking system and the gov regulators had learned lessons and it was all definitely fixed. That hasn't happened. We did dodge the traffic, but nobody is happy about any of it.

Posted by: TomCantlon | October 21, 2010 12:58 PM | Report abuse

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