Many of us that opposed TARP, the 2009 bailout of financial institutions, for a couple of different reasons. The main reason being that bailing out business for is counter to the belief in free markets. In other words, we don’t believe in the concept of “too big to fail.”
The other reason being is that it was bad policy. Once you’ve put the concept of “too big to fail” into public policy, you’ve set that as a precedent for the future. It doesn’t discourage bad lending behavior, so when the next crisis comes along — and it will, taxpayer-funded bailouts will again be the answer for politicians. And this is what a new study from the Federal Reserve Board shows via James Pethokoukis:
The Troubled Asset Relief Program involved a major infusion of government funds into the U.S. banking system in an attempt to stabilize financial markets. The program was developed by congressional mandate; however, the purpose of the program was not entirely clear from the beginning. The program was originally portrayed as an effort to reduce the risk profile of banks by increasing bank capitalization.
However, the public response to the program also generated a significant push for banks to convert the funds into loan originations. Based on this purpose, banks were being encouraged to make more loans in an economic downturn which may have induced looser lending standards (Guner, 2008).
The results from the event study illustrate that the average risk rating at large TARP recipients increased more than at large non-TARP recipients following the capital infusions. Conversely, the risk of loan originations by small TARP recipients appears to have decreased relative to non-TARP recipients.
Newt Gingrich likes to portray himself as a “Reagan Conservative,” someone that believes in and pursues limited government policies. But the Washington Post reports that Gingrich was critical of Ronald Reagan’s views and wasn’t at all an advocate of a limited government:
In an unnoticed 1992 speech, Newt Gingrich in a single utterance took aim not only at a beloved conservative icon but also at a core tenet of the conservative movement: that government must be limited.
Ronald Reagan’s “weakness,” Gingrich told the National Academy of Public Administration in Atlanta, was that “he didn’t think government mattered. . . . The Reagan failure was to grossly undervalue the centrality of government as the organizing mechanism for reinforcing societal behavior.”
A review of thousands of documents detailing Gingrich’s career shows it wasn’t the first time he had criticized Reagan, whom he regularly invokes today in his campaign for the Republican presidential nomination. When Gingrich was in the House, his chief of staff noted at a 1983 staff meeting that his boss frequently derided Reagan, along with then-White House Chief of Staff James A. Baker III and Robert H. Michel, the House Republican leader.
The ad Chrystler ran during the Super Bowl featuring Clint Eastwood — dubbed “Halftime in America — has prompted some criticism from conservatives who see it as an endorsement of the auto bailout and President Barack Obama.
Eastwood, who describes himself as a libertarian, denied that the ad was meant to lend any support to Obama, rather to promote the Detroit. According to Eastwood, earnings from the making of the ad went to charity.
It sounds innocent enough on Eastwood’s part, and I think making his part out to be anymore than it was is misguided. However, the criticism of Chrysler, which was bailed out by taxpayers, is understandable as they are running an ad with a name and face familiar to Americans to make us feel good about the fact that they took billions from the government because they couldn’t compete on the open market.
Over at Reason, Remy gives the ad the humorous treatment that only he can give:
While President Barack Obama often rails against corporate greed and expresses a desire to hike taxes on “millionaires and billionaires,” Wall Street executives — the very same corporatists that conluded with Washington to bring us TARP — are sending a substantial amount of money to his campaign. Justin Elliott explains over at Slate:
The consensus view of President Obama’s State of the Union address is that it was a “populist pitch” that sought to, as the Wall Street Journal reported, “tap widespread anti-Wall Street sentiment and voter anger about economic disparity without scaring independents.”
That take on the Obama reelection campaign strategy is in line with what we’ve been hearing for months out of the White House, which previewed the concept to the Washington Post as early as October, just as the Occupy movement was getting underway.
The tension or perhaps contradiction with this strategy is that, as I’ve been documenting, this administration and the Democratic Party are not fundamentally anti-Wall Street institutions. They have deep ties to the financial services industry.
Aspects of that relationship that have surfaced recently include: Obama’s hiring as a top campaign aide of Broderick Johnson, who had been pursuing a lucrative career lobbying for the big banks; the fact that executives of Bain Capital have contributed generously to Democratic campaigns in recent years; and so on.
Back when the Congress was taking up the Emergency Economic Stabilization Act, which created the Trouble Assets Relief Program (TARP), as financial markets were taking a tumble, many free marketers warned that taxpayers would lose billions. Many members of Congress tried to play down the losses or said that taxpayers would even profit.
If only that were the case. However, the watchdog that oversees the TARP program says that taxpayers are still owed nearly $133 billion:
A government watchdog says U.S. taxpayers are still owed $132.9 billion that companies haven’t repaid from the financial bailout, and some of that will never be recovered.
The bailout launched at the height of the financial crisis in September 2008 will continue to exist for years, says a report issued Thursday by Christy Romero, the acting special inspector general for the $700 billion bailout. Some bailout programs, such as the effort to help homeowners avoid foreclosure by reducing mortgage payments, will last as late as 2017, costing the government an additional $51 billion or so.
The gyrating stock market has slowed the Treasury Department’s efforts to sell off its stakes in 458 bailed-out companies, the report says. They include insurer American International Group Inc. (AIG), General Motors Co. (GM) and Ally Financial Inc.
It will also be challenging for the government to get out of the 458 companies as the market remains volatile and banks struggle keep afloat in the tough economy, it says.
Congress authorized $700 billion for the bailout of financial companies and automakers, and $413.4 billion was paid out. So far the government has recovered about $318 billion. The bailout is called the Troubled Asset Relief Program, or TARP.
We’ve noted Newt Gingrich’s anti-conservative points on multiple occasions, mostly recently my post yesterday on his support of an individual mandate for health insurance coverage. This isn’t the only stain on his record, it’s merely one of them. We could easily point to his support of Medicare expansion or TARP as further evidence. We could also point to Stephen Slivinski’s article here from last month explaining how Gingrich betrayed the revolution that brought Republicans to power.
The latest video on from our friends at Economic Freedom, featuring Don Boudreaux (George Mason University), Susan Dudley (George Washington University) and Bradley Schiller (University of Nevada-Reno.
The most interesting dynamic in the race for the GOP’s nomination for president is Tea Party-minded voters. They switched around from one candidate to the other just as quick as Mitt Romney changes on positions on issues. Frankly, it’s irritating given that a couple of the candidates they’ve gotten behind have supported big government programs and have intervention in the market.
Polls show that the Tea Party voting bloc is largely getting behind Newt Gingrich, who has emerged as their latest “hero.” My understanding of the Tea Party movement was that we were trying to fight against cronyism, corporatism, and big government; so that begs the question: Why is the Tea Party lining up for someone that epitomizes statism? Conor Friedersdorf explains that Gingrich encouraged Republicans, including George W. Bush, to betray taxpayers:
On December 7, 2003, Newt Gingrich appeared on NBC’s “Meet the Press” opposite Tim Russert, who asked about the beginnings of conservative discontent over President Bush’s profligate spending impulse:
MR. RUSSERT: Let me turn to the domestic front. Here’s the headline of yesterday’s paper: “Conservatives Criticize Bush On Spending.” You ran in 1994 with a Contract with America, pledging a balanced budget. Deficit’s now $500 billion.
MR. GINGRICH: Right.
MR. RUSSERT: You supported the president’s Medicare bill, another $400 billion entitlement. What happened to balanced budgets and Republicans?
During a recent sit down with CNN’s Wolf Blitzer, Newt Gingrich, who is leading the polls in the race for the GOP nomination, said that Mitt Romney is on his list of potential running mates (video at the link):
Newt Gingrich has at least one name on his list of potential running mates: GOP rival Mitt Romney. “I think Mitt Romney is a very admirable person, and I’m not going to pick a fight with Mitt Romney,” Gingrich said in an interview Wednesday with CNN’s Wolf Blitzer.
When asked if he would ever ask Romney to be his vice presidential nominee, Gingrich didn’t mince words.
“I think the consensus is that he’d certainly be on the list, whether he’d want to or not,” Gingrich said. “He’s a very competent person. This is a very serious man. I would certainly support him if he became the Republican nominee.”
Um, no thanks. Both Gingrich, who is the source of skepticism amongst conservatives, and Romney have supported an individual mandate for health insurances, bailouts, and other big government programs. Gingrich lobbied for GSEs like Freddie Mac, which helped inflate the housing bubble. Romney changes his beliefs almost daily. Neither of them are serious about reducing the size of the federal government.
A Gingrich/Romney ticket would essentially be asking voters to sign off on everything wrong with the GOP. That would be an electoral disaster.
It’s not the excellent video that one of his supporters recently put together, but Ron Paul’s campaign has put together a great video (you can watch it below) detailing the hypocrisy of Newt Gingrich, who is the latest anti-Romney to emerge in the race.
Here’s part of the e-mail blast from Paul’s camp:
This candidate was for the individual mandate that served as the model for “ObamaCare.” He was originally for the TARP bank bailouts before he was against them. He joined with Nancy Pelosi to promote the anti-business “global warming” agenda.
He slammed Paul Ryan’s budget plan as “extreme,” calling it “right wing social engineering.”
You might think I am talking about Mitt Romney. Heck, you might think I’m talking about a liberal Democrat. But I’m not.
That candidate I’m talking about is Newt Gingrich. He is what I like to call a “counterfeit conservative.”
And I have barely even scratched the surface!
The video also makes not of Gingrich’s lobbying and ties to the corportist health insurance industry. All of this should make conservatives skeptical of Gingrich, but sadly they are buying what he is selling: