Debunking TARP

Endless necessary, it seems, but always worthwhile.  Ira Stoll debunks the claims made for the Troubled Asset Relief Program:

….The return is not impressive. Geithner and the Times tend to talk about the profits—”$32 billion,” “a couple hundred billion dollars”—without mentioning the amount spent or the amount of time it was invested. The same ProPublica scorecard that shows the profit—$30.4 billion, not the $32 billion the Times claims—says $611.2 billion has gone out the door. A $30 billion return on $611 billion is a return of about 5 percent total over five years. That’s pathetic during a five-year period in which the total U.S. stock market has been returning about 19.5 percent a year, or a compounded total return of about 150 percent. Even if you use the “$179 billion” or “couple hundred billion,” figure, if it is the return over 15 years on a $611 billion outlay, it’s not exactly a spectacular success.

It ignores what the money could have done in private hands. If you divide that $611 billion among the 140 million or so individual income tax filers who were taxed or indebted to pay for the outlay, it works out to about $4,360 for each tax filer. Who knows what that money could have produced if it were spent, saved, or invested by individuals rather than by Geithner, Henry Paulson, or Ben Bernanke?

The profits are a sign the program was unnecessary. If the government made money by investing in “troubled” assets, then so could have private investors motivated by a desire for profit. The private investors might have even been better at it….

Worth reading in full, and saving for reference.

Via Timothy Geithner’s Flawed Defense of TARP @

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