Daily, I get chain emails from Republican friends ranging from the socialism and Marxism of the President and the Democratic Party.Â Usually, these notes are accompanied with photos and suggestions to “forward this to all your friends.” I will be forwarding this LA Times story later today which suggested very simply that the federal bailout of banks and the automobile industry worked and averted what could have been a second Great Depression.
Credit for this program goes to President Bush and the Democratic Congress who recognized the Federal Government needed to do something to halt the fast and dramatic collapse of the economy and to President Obama and the 111th Congress for executing on the strategy.
The bailouts worked, are projected to cost taxpayers significantly less than originally thought, and in some cases, will turn a profit for taxpayers.
From the story:Â Almost three years after a series of government bailouts began, what many feared would be a deep black hole for taxpayer money isn’t looking nearly so dark.
The brighter picture is highlighted by the outlook for the bailouts’ centerpiece â€” the $700-billion Troubled Asset Relief Program.
“It’s turning out to cost one heck of a lot less than what we all thought at the beginning,” said Ted Kaufman, a former U.S. senator from Delaware who heads the congressionally appointed panel overseeing TARP.
In mid-2009, the program was projected to lose as much as $341 billion. That’s been reduced to $25 billion â€” partly because of the controversial decision to pump much of the TARP money into banks instead of launching a large-scale purchase of securities backed by toxic subprime mortgages.
There is now broad agreement that the bailouts worked, stabilizing the financial system and preventing an even deeper crisis.
Banks have paid back close to all of the $245 billion they received, and the Treasury Department estimates that interest and dividends on those cash infusions ultimately will give taxpayers a $20-billion profit.”
Here’s my favorite set of details for this story; the misconception of what the bailouts were all about:
“In a Newsweek poll last fall, 63% of respondents said the government’s actions to rescue the banking and financial system were bad for the country.
But some of that anger appears to be fueled by misconception, Kaufman said. He cited a Bloomberg poll last fall in which 60% of respondents said they thought most of the TARP money would not be recovered.
A good chunk of the money never was spent. Just $410 billion was distributed. And because the program formally ended last year and only its existing initiatives can continue to be funded, it will not spend more than $475 billion.
Massad said Treasury officials understand why the program has been so reviled, but added that the public should focus on the bottom line.
“We did what we had to do, it worked better than people thought, and it’s been far cheaper than people thought it would be,” he said.
Comopare this program with the bailout of the Savings & Loan Industry under President Reagan in the 1980s.Â According to the U.S. General Accounting Office, theÂ estimated cost of the crisis to taxpayers was around USD $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government from 1986 to 1996.Â And not a dime was paid back.Â