The oversight panel led by television funnywoman Elizabeth Warren has concluded that TARP has been asset for the economy. Except for this part (in the panel’s own words):
1) It is apparent that after fourteen months the TARP’s programs have not been able to solve many of the ongoing problems Congress identified. Credit availability, the lifeblood of the economy, remains low.
2) In light of the weak economy, banks are reluctant to lend, while small businesses and consumers are reluctant to borrow.
3) In addition, questions remain about the capitalization of many banks, and whether they are focusing on repairing their balance sheets at the expense of lending.
4) The FDIC, facing red ink for the first time in 17 years, must step in to repay depositors at a growing number of failed banks. This problem may well worsen, as deep-seated problems in the commercial real estate sector are poised to inflict further damage on small and mid-sized banks.
5) Large banks have problems of their own. Some of them, waiting for a rebound in asset values that may still be years away, continue to hold the toxic mortgage-related securities that contributed to the crisis. Consequently, the United States continues to face the prospect of banks too big to fail and too weak to play their role adequately in keeping credit flowing throughout the economy.
6) The foreclosure crisis continues to grow.
7) Furthermore, the market stability that has emerged since last fall’s crisis has been in part the result of an extraordinary mix of government actions, some of which will likely be scaled back relatively soon, and few of which are likely to continue indefinitely. The removal of this support too quickly could undermine the economy’s nascent stability.
8) While strong government action helped prevent a worse crisis, it may have done so at a significant long run cost to the performance of our market economy. Implicit government guarantees pose the most difficult long-term problem to emerge from the crisis. Looking ahead, there is no consensus among experts or policymakers as to how to prevent financial institutions from taking risks that are so large as to threaten the functioning of the nation’s economy. Congress is currently grappling with this issue as it considers how to respond legislatively to the financial crisis. It is clear that a failure to address the moral hazard issue will only lead to more severe crises in the future.
Me: Oh, and then you have the devolution of TARP into a slush fund to bail out AIG, union auto workers and congressional Democrats worried about how the high unemployment rate will hurt their 2010 chances. Thus the new jobs bill. But it did stop the panic, unless you believe John Taylor that it really made the panic worse through uncertainty.