Counterparties: The bailout according to Treasury
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The Treasury Department is out with a new presentation on the bailout, which attempts to calculate the combined costs of the crisis-era bailouts, including TARP and actions by the FDIC and the Fed. If you think Treasury’s accounting is even directionally correct, the presentation has some very good news: The bailout cost less than expected, averted a deeper crisis and may even turn a net profit.
It’s a convincing case that rescuing the financial markets was necessary. But that’s much different from saying the bailouts were perfectly executed.
This is a document about a messy collection of programs. Which is why we get things like this convoluted slide intended to illustrate how the government’s myriad financial arcana helped individual Americans.
This chart is the crux of Treasury’s problem: If you’re trying to convince Americans that things could be much worse than our 8.2 percent unemployment, protracted foreclosure crisis and fragile recovery, it helps if you can tell a simple story. And this is not a simple matter.
Contrast Treasury’s take with another regulator’s. Sheila Bair, who was head of the FDIC until last year, has criticized the Fed’s zero interest rates as a huge subsidy for financial companies but not for average Americans, and has slammed what she sees as a growing “too big to fail” problem – which explains her reported refusal to agree to Geithner’s 2008 request that the FDIC guarantee literally all debt issued by bank holding companies.
It’s telling, then, that the gray line labeled “Financial markets” in Treasury’s chart reaches into each and every aspect of “crisis response that helped support families and business.” More than three years on, Treasury still can’t shake the perception that this was a bailout that focused too heavily on the financial markets.
Treasury’s slides suggest a host of markets – including commercial and industrial lending, bank capital and credit cards – are higher or nearly back to pre-crisis levels; the middle class hasn’t been so lucky.
And on to today’s links:
Yield on Spanish bonds rises above 6 percent – WSJ