I’ve read a couple articles on how we were in “Crisis” and the entire world would have collapsed. I’m wondering now looking at things from a bit of hindsight, could it be much worse than it is now? IOW how many think TARP was just a complete waste of cash?
~Matt
waste of cash and will also prolong the downturn…
100% agree.
I think that things would have gotten worse. A lot of the problem we are experiencing is psychological. To do nothing and let chips fall where they may was not an option. A President has to be seen as strong and a leader. To do nothing, for GW or Obama, would have been a mistake. I still think the bailouts and TARP was a mistake but I understand why they were used.
Yes, it could have been worse (I said “could” not “would”). From what I have read, Paulson was told banks were going to fail if the government did not pass TARP and immediately inject $250 billion into them. If banks had failed, it would have been disastrous. Far worse than anything we are experiencing now. Since TARP passed, no major bank has failed. In that respect, it “worked.” It is also important to remember that letting banks fail and letting other industries (eg. auto) fail are two very different things. Banks are the utility by which every other business runs.
All this being said, I am a Libertarian and a fiscal conservative. Did we waste money on TARP? Hell yeah. That is what our government does- waste money (and they’re damn good at it). It is what Bush did, it is what Obama will do, and it is what McCain would have done. Did TARP prevent banks from failing? I suppose, just like sprinting the first two miles of a marathon will get me into the lead pack. This does not mean that it is a wise or sustainable strategy.
I think that things would have gotten worse.
My question is how would they have gotten worse?
A lot of the problem we are experiencing is psychological.
I would say “Some” but certainly not “A Lot”. Companies are bleeding cash and had been on rocky ground WELL before the panic. I think we are in worse condition than we probably should be because of “Panic” but I don’t think to much.
To do nothing and let chips fall where they may was not an option. A President has to be seen as strong and a leader. To do nothing, for GW or Obama, would have been a mistake.
I’m not sure I would say they should have done nothing, I don’t think TARP was the right move and I definitely think the stimulus package was the wrong move. I’m just wondering what would have happened if TARP never happened and what “other options” could we have taken?
~Matt
It’s still getting bad and will get worse.
I think that things would have gotten worse.
My question is how would they have gotten worse?
A lot of the problem we are experiencing is psychological.
I would say “Some” but certainly not “A Lot”. Companies are bleeding cash and had been on rocky ground WELL before the panic. I think we are in worse condition than we probably should be because of “Panic” but I don’t think to much.
To do nothing and let chips fall where they may was not an option. A President has to be seen as strong and a leader. To do nothing, for GW or Obama, would have been a mistake.
I’m not sure I would say they should have done nothing, I don’t think TARP was the right move and I definitely think the stimulus package was the wrong move. I’m just wondering what would have happened if TARP never happened and what “other options” could we have taken?
~Matt
Best guess is that by doing nothing it would appear that the problem was too big to solve and we should just toss in the towel. That's never a viable option. I wish we could have watched another time line of what would have happened sans tarp.
Best guess is that by doing nothing it would appear that the problem was too big to solve and we should just toss in the towel.
My best guess is the markets crash, we end up a little below were we are now. By this time we’re at the same place we are today with the credit markets starting to loosen up, markets at about the same place and we are a couple trillion less in debt 
I think we could have had similar effect doing what we are just starting to do now, which is “Reworking” loans, without TARP.
~Matt
I’m wondering now looking at things from a bit of hindsight, could it be much worse than it is now?
if by tarp you mean the capital injections, i think they were necessary in the sense that they were a reaction to failures that, had they all been allowed to happen, would have resulted in a much more systematic failure. you have to keep in mind that depositors are covered by federal insurance, insurance on trades and bonds are covered by credit default swaps that are too many and too large for the providers to bear, etc.
on the other hand, i think that it’s unfortunate that paulson couldn’t get over himself and simply commit to ramping up a program to buy up troubled assets - which is pretty much how every banking crisis has been solved thus far (and there have been plenty of them).
look at japan - its government tried a bandaid approach that was half-assed and ended up hampering growth for nearly a decade. the japanese dicked around for years and years before they finally got serious about cleaning up banks’ balance sheets.
then look at countries like sweden, norway, south korea - all of them got out of their banking crises with only two or three years of disruption. it was costly (15% of gdp in korea’s case!), but worthwhile in the long run.
It “worked” because you are assuming that the banks were definitely going to fail if they didn’t get the cash. Are you sure that is true, or did they just convince Paulson of that so that they could continue to line their pockets for a while longer?
Greed is the strongest force known to man.
I said “if” the banks had failed. I am not assuming they would have and am not convinced one way or the other yet. Still, I am not sure how happy the banks are with the outcome of TARP. It has pushed us into nationalization of the banks and I do not think this is something they really wanted. I suppose TARP is sort of Midas’ golden touch for them. They got the money they wanted but are going to come to realize the price of that money in time.
Here’s Frontline’s (PBS) view on what happened to the banks and why they were looking for a bailout.