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TARP Bailout: It’s a Success and Failure

This article was written by in Economy, Featured. 15 comments.


The Troubled Asset Relief Program (TARP), created and enacted by President George W. Bush’s administration in 2008 with strong support from Republicans, has been deemed a success for taxpayers by President Obama’s administration on the date of its so-called ending, despite being criticized by opponents both liberal and conservative. Only $386 billion of the original $700 billion authorized by the TARP was distributed to help the economy. The second $750 billion authorized was never touched.

The money that has been repaid by bailed-out companies has been profitable for taxpayers thus far, but most organizations are predicting an overall loss of $30 billion, though some opinions put that figure around $90 billion. Even though the program has become wildly unpopular and is seen as a symbol of Democrat overspending, economists agree that enacting the TARP was a better option than the alternative — not doing anything to prop up AIG and GM. We’ve experienced an national jobless rate of over 10%, and some people are mad as hell, but with a collapse of the financial and automotive industries, that number could have been 15% or 20%.

Not every program within the TARP has been as successful, however. The Home Affordable Modification Program (HAMP) has not attracted lenders to participate. There has been money available to help homeowners who, whether because of unemployment, overextension or shady lending practices, can’t afford their mortgages. Without lenders agreeing to participate, the money destined for “Main Street” rather than “Wall Street” never made it into anyone’s hands.

History may look upon the TARP as a failed economic program, but that will be a result of politics, not economics. Public perception becomes reality.

Updated October 10, 2010 and originally published October 6, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 15 comments… read them below or add one }

avatar Money Beagle

I’ve said all along that keeping the auto companies afloat was the best alternative in that situation, but I still hear people around the blogs say that they should have just let GM and Chrysler fail. I can’t understand that because it seems apparent that we’d have been a lot worse off had that been allowed to happen. That part of it was worth it and I think worked very well.

As far as the money put towards housing, I think that the best alternative would have been to write down current mortgage holders principle across the board. That would have kept people in their homes more so than trying to attract new buyers to the market. Just my opinion, though.

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avatar David M

“The Troubled Asset Relief Program (TARP), created and enacted by President George W. Bush’s administration in 2008 with strong support from Republicans”

I can not believe you have written the above sentence! From what you hear currently, not only did Republicans not support it, Democrats did not either!

I heard the person who ran the TARP program on National Public Radio yesterday and he mentioned the final cost would be around $30 billion. I’m sure the public will always KNOW that the TARP cost the taxpayers $500 billion!

“History may look upon the TARP as a failed economic program, but that will be a result of politics, not economics. Public perception becomes reality.” That is the absolute truth!!!!!

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avatar Luke Landes ♦127,535 (Platinum)

In terms of strong support, twice as many Republicans in the Senate voted for the final bill than against it. The House vote was different but the bill would have passed there even if every Republican voted nay.

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avatar David M

Flexo,

You need to keep away from the facts – No republican and no democrat (well almost none) wants to admit they voted for the Tarp – don’t make them squirm by bringing up facts!

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avatar PT

We can’t say with certainty that we are better off from an economic perspective because of TARP. You just can’t hand pick a couple of companies and say their lack of job losses made the whole thing positive. Who knows where we would be right now had we just let the chips fall at the time. No one can say with certainty that we wouldn’t be in a better place.

Likewise, we can’t say TARP was a failure either.

That’s the trouble with the bailouts is that no one can say whether they helped the entire economy or not. That’s why I think it’s best to just stay out of the way. From my perspective, it’s not the govts job to chose winners and losers.

Sure GM and AIG won, but how many other companies haven’t? How many jobs have been lost in this “recovery summer”?

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avatar Steve

This is (was) not a scientific experiment. There was no control group, multiple trials (repeatable results), isolation of a single variable, etc.

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avatar Luke Landes ♦127,535 (Platinum)

As is always the case in real life, so either one relies on experts to speculate about what could have occurred or one doesn’t bother to think about it. :-)

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avatar jim

Government taking a “just stay out of the way” policy is a large part of how the whole mess got started in the first place.

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avatar David M

PT,

All I know is the Republican who ran the TARP thought it was a HUGE success. He thought the economy would have been worse than anything any of us could imagine if the TARP was not put into place.

You r right that “we can’t say with certainty…”, however, I’m going with the man who ran the TARP and I’m going to assume we would have been much worse had it not been put into place.

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avatar eric ♦1,549 (Half-Dollar)

I don’t agree with everything about TARP, but in hindsight I do believe it was better than not doing anything. People are always going to jump to conclusions and criticize. It’s easier for them than to think of a solution.

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avatar Josh

Does anyone remember when the airlines went bankrupt? I don’t know about you, but the complete destruction of the worldwide airline industry was really inconvenient. I no longer have the ability to purchase a ticket to ride on an airplane from one city to another.

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avatar Luke Landes ♦127,535 (Platinum)

I’m not sure if you’re trying to be sarcastic, but the bankruptcies did leave many smaller markets unserviced by airlines. It’s not a situation directly relatable to the domestic auto industry, if that was your point.

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avatar jim

The government bailed out the airlines as well : $18.6 billion in 2001.

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avatar Jason @ Redeeming Riches

I remember reading a “behind the scenes article” that talked about what went on during those 48 hours or so when they decided to create the TARP. Basically, what they said was that we were within 24 hours of a serious global economic meltdown! I think from that standpoint, however much we agree or disagree with the funding, it was a success.

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avatar Andrew

I couldn’t agree more…there is always a negative spin we can take on the TARP given how dire the economic situation was and currently still is…but there is no doubt that it has had some positive effects on the economy and specifically the unemployment rate.

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