The NRCC's Misleading Attacks On Jim Marshall And TARP

October 14, 2010 11:04 am ET

The NRCC is pulling out all the stops in their attack on Rep. Jim Marshall's (D-GA) support of the Troubled Assets Relief Program (a.k.a. TARP). However, their latest ad actually ignores key facts about the "Wall Street bailout" and its successes. Not only did TARP help stabilize the financial system, it saved the economy from the brink of a depression. In addition, though the NRCC's ad claims that the "bailout" has created "billions in new debt," recent estimates show that taxpayers could actually earn a profit on TARP.

NRCC: "Jim Marshall's Wall Street Bailout"

[MARSHALL:] "If the pain is never perceived then people tend not to give the credit for having avoided it." That's Jim Marshall the day he voted to bail out Wall Street, the first time, creating billions in new debt. And while Wall Street is seeing record profits, the pain we feel hasn't gone away. Jim Marshall: He said he'd give up his seat over the bailout. Maybe it's time he did. The National Republican Congressional Committee is responsible for the content of this advertising.

Wall Street "Bailout" Helped Stabilize Industry, Economy

In The Midst Of A Downward Spiral, TARP Helped Stabilize The Financial System. As reported by Reuters: "The U.S. government's $700 billion financial rescue program has helped to stabilize the system, but may be creating systemic problems by fueling a belief banks will always be bailed out, a watchdog for the program said on Wednesday. 'Compared to where we were last October there is no question that the system if far more stable. We were on the precipice and I think the (Troubled Asset Relief Program) contributed with the other programs to pull us back,' Neil Barofsky, the special inspector general for the program, told CNBC. 'But I do think because of the moral hazard, because of some systemic risks that are associated with making these institutions bigger and bigger ... systemically we may be in a more dangerous place even then we were a year ago,' he said." [Reuters, 10/21/09]

Princeton, Moody's Economists Say "Highly Effective" Government Response To Crisis Saved 8.5 Million Jobs. According to the New York Times: "Like a mantra, officials from both the Bush and Obama administrations have trumpeted how the government's sweeping interventions to prop up the economy since 2008 helped avert a second Depression. Now, two leading economists wielding complex quantitative models say that assertion can be empirically proved. In a new paper, the economists argue that without the Wall Street bailout, the bank stress tests, the emergency lending and asset purchases by the Federal Reserve, and the Obama administration's fiscal stimulus program, the nation's gross domestic product would be about 6.5 percent lower this year. In addition, there would be about 8.5 million fewer jobs, on top of the more than 8 million already lost; and the economy would be experiencing deflation, instead of low inflation. The paper, by Alan S. Blinder, a Princeton professor and former vice chairman of the Fed, and Mark Zandi, chief economist at Moody's Analytics, represents a first stab at comprehensively estimating the effects of the economic policy responses of the last few years. 'While the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective,' they write." [New York Times7/27/10, emphasis added]

Ignatius: Bailouts "Almost Surely Saved The Country From Another Great Depression." According to the Washington Post's David Ignatius: "Constant repetition of anti-government rhetoric in our political echo chamber has dulled Americans into overlooking an important and perhaps surprising fact: We have just lived through one of the more notable successes of government intervention in modern times -- the auto and bank rescues that almost surely saved the country from another Great Depression. [...] A similar success story seems likely with most of the rest of the money spent for TARP, the acronym that is a dirty word this political season. The Troubled Assets Relief Program, coupled with emergency facilities at the Fed, allowed a "work-out" for a financial system that was on the verge of freezing up. Most of the TARP investments, it seems, will be recovered, too, including loans made to the notorious insurance behemoth AIG." [Washington Post, 10/14/10, emphasis added]

Taxpayers Could Actually Earn A Profit On TARP

NYT: Government Bailouts To Banks, Auto Companies, "Could Conceivably Earn Taxpayers A Profit." According to the New York Times:

Even as voters rage and candidates put up ads against government bailouts, the reviled mother of them all - the $700 billion lifeline to banks, insurance and auto companies - will expire after Sunday at a fraction of that cost, and could conceivably earn taxpayers a profit.

A final accounting of the government's full range of interventions in the economy, including the bailouts of the mortgage finance giants Fannie Mae and Freddie Mac, is years off and will most likely remain controversial and potentially costly.

But the once-unthinkable possibility that the $700 billion Troubled Asset Relief Program could end up costing far less, or even nothing, became more likely on Thursday with the news that the government had negotiated a plan with the American International Group to begin repaying taxpayers.

TARP

[New York Times, 9/30/10, emphasis added]

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