Successful though unpopular, TARP ends today

October 3, 2010 at 12:00a.m.

McClatchy Newspapers

WASHINGTON

A wildly unpopular government rescue program credited by economists with preventing another Great Depression goes out of business today, two years to the day it was created.

Today, the Troubled Asset Relief Program, known as the bank-bailout bill, loses authorization to make new expenditures. From this point forward, TARP will be in wind-down mode, although much of the money lent out already has been repaid — at a profit for taxpayers.

Originally envisioned as a blank check for the government to spend as much as $700 billion to rescue the financial system, the actual cost to taxpayers now is estimated to be only a seventh of that amount. The government has earned almost $13 billion in dividends from the bank stock it received in exchange for the taxpayers’ investment and earned an additional $8.2 billion from the sale of preferred stock.

The Treasury Department estimates that taxpayers still are on the hook for about $100 billion at this point — a number expected to shrink with continued repayments and asset sales. The nonpartisan Congressional Budget Office recently put the estimated total TARP cost at around $66 billion.

On Thursday, White House press secretary Robert Gibbs said the latest internal estimates put the number under $50 billion.

Still, TARP became politically poisonous. People considered it free money for Wall Street executives whose recklessness dragged the world into the Great Recession.

“Objectively, TARP has been an economic success. Politically, it’s been a miserable failure,” said Darrell West, director of governance studies at Washington’s Brookings Institution, a center-left policy-research center.

Even though TARP was a Bush administration initiative and got strong congressional support from Republicans in 2008, today’s GOP has painted TARP alternately as a Wall Street bailout or a cash kitty to fund Democrats’ wish list.

President Barack Obama “has not done as good a job communicating as he should. He’s allowed the opponents to frame the issue unfavorably,” West said.

In the recently released “Pledge to America,” a campaign document from Republicans in the House of Representatives, GOP lawmakers vow billions in savings by eliminating the TARP.

Problem is, recently passed legislation to revamp financial regulation already did that, and set the Oct. 3 TARP expiration date.

When first presented by then-Treasury Secretary Henry Paulson, TARP money was supposed to be used to buy toxic assets from banks to bolster their balance sheets, allowing them to resume lending. Soon after the Oct. 3, 2008, creation of TARP, however, Paulson shifted gears and chose instead to inject $245 billion directly into banks.

In December 2008, President George W. Bush authorized $17 billion in TARP funds to help General Motors and Chrysler avoid bankruptcy. Eventually, expanding under Obama, some $82 billion went to rescue the two automakers and keep credit flowing to their suppliers.

Unsavory as it was politically, economists credit these TARP efforts with helping to stabilize the financial sector and preventing an even worse outcome.

“I think it was a great success. The bank bailout part of TARP was an astounding success. Couldn’t have gone any better,” said Mark Zandi, chief economist with forecaster Moody’s Analytics.