On last Sunday’s “Up With Chris Hayes” there was a discussion about political calculations for Republicans. The question was whether to work with Democrats or go with straight obstructionism. At one point Hayes said:
Bob Bennett was a fairly conservative senator from Utah, right, of long standing, he was not some super lefty heterodox guy, right? And his huge heterodoxy was that he had cosponsored a health care bill with Ron Wyden. It was not the health care bill that actually got passed. It was called the Wyden-Bennett, and in fact, a lot of Republicans later said, well, we really like Wyden-Bennett, right? But what happened to Bob Bennett just for cosponsoring this health care bill? He went back to Utah and got booted out in that state’s Republican convention after serving, what, two or three terms, OK.
Something really big is missing from Hayes’ observation: TARP. Granted, he was talking about Republican political strategy and not giving an overview of Bennett’s career. The exact details of the unhappiness of Utah’s GOP base is not central to his point, and their unhappiness over Bennett’s partnering with Wyden serves Hayes’ point adequately. Hayes could probably say (with good reason) that it would have sidetracked the discussion to go into details about Bennett’s defeat when it was merely being used to give a brief illustration of a larger point. Fair enough.
Still, I notice when a national-level analyst fails to mention TARP when the opportunity arises. TARP is unique in our recent history: A moment when activists on both the left and the right united in furious opposition to something happening in Washington. Over the last generation or so, the issues that have drawn the most passionate responses - protests in the run up to the Iraq war, opposition to immigration reform, Occupy Wall Street, the Tea Party movement (the latter two in part a response to the corruption represented by TARP), etc - all of them were predominantly driven by either the left or the right. With one exception.
Everyone hated TARP. It was not left versus right, but outsider versus establishment. Democrats and Republicans in the capitol supported it. DC-based reporters and analysts assured audiences that it was distasteful but necessary. (This was typically accompanied with a false choice of doing nothing or letting civilization collapse.) All the players inside the Beltway were heavily invested in it, but outside the hothouse it was loathed and reviled. It was unpopular across the political spectrum. On what other issue has that been true?
TARP was unpopular in part because it was terrible policy (see below) but also because it was symbolic. It stood as the tip of the iceberg, the visible part of a much vaster body of sketchy deals. Few knew the details, in part because much of it was done behind the scenes, but in part because of obfuscation. Those who weren’t experts in high finance (i.e. almost everyone) were left with a sense that something wasn’t right, but we couldn’t keep our eye on the queen of hearts.
This 2011 exchange (PDF) between Congressman Sean Duffy and Federal Reserve chairman Ben Bernanke is a great illustration - a classic of the “if you can’t dazzle them with brilliance” genre:
Mr. DUFFY. …Let me move on to a different question. We had talked about the QE2 with Dr. Paul. When you buy assets, where does that money come from?
Mr. BERNANKE. We create reserves in the banking system which are just held with the Fed. It does not go out into the public.
Mr. DUFFY. Does it come from tax dollars, though, to buy those assets?
Mr. BERNANKE. It does not.
Mr. DUFFY. Are you basically printing money to buy those assets?
Mr. BERNANKE. We are not printing money, we are creating reserves in the banking system.
Mr. DUFFY. In your testimony - I only have 20 seconds left - you talked about a potential additional stimulus….
What jumps out at me is not that, as some have noted, Bernanke repudiates our central political myth that government can only spend money it raises through taxes. (Government, unlike households, can print more money when it wants to.) Nor is it that Bernanke’s “we are not printing money” line directly contradicts his recent position on the matter.
Instead, note the ease with which Bernanke shoos Duffy away from an inconvenient line of discussion. Duffy could have shot back, “‘creating reserves’ being 21st century bankerspeak for printing money, right?” He could have stayed on that and gotten Bernanke to admit that adding zeroes to balance sheets is just a high tech way of printing money, then excoriated Bernanke for his weaselly parsing of language. But Duffy, like most of his fellow citizens, doesn’t understand finance well enough to pounce on Bernanke’s evasive euphemism. Instead he just says, well I’m almost out of time so on to other topics.1
Yet even without the follow up, the exchange leaves the impression, just like TARP did, that something was hinky about it, that we didn’t know all the details but that it didn’t pass the smell test. That vague distrust of high level banking officials is one of TARP’s legacies - as is the codifying of impunity for financial elites. TARP formalized government support of big banks, which meant the people running them had to remain in place, which meant they could not be held liable for any kind of criminality. Too big to fail for institutions has led to too big to jail for executives. The moral hazard recriminations from TARP have been absolutely catastrophic. Defenders of TARP rarely try to account for that cost (or for the institutional value of a government guarantee).
The extraordinary actions taken by officials are also part of the public’s concept of TARP. This includes so-called Structured Investment Vehicles like the odious Maiden Lane II (with its 100 cents on the dollar payout to AIG counterparties), for example.2 It encompasses regulatory forbearance, banks being allowed to print money (oops - create reserves), and the now-certain government promise of solvency. As are the promises made at the time that have come to nothing, the regulatory paralysis, and general descent into banana republic-style institutions. All of that is TARP in the popular imagination, and for good reason: it’s all of a piece.
There have been quite a few attempts to reframe it as good policy, none of them rigorous or convincing. The most notable on my reading list came from Steve Benen; here is one example. The key in this formulation is to look at TARP in isolation, and to only account for the dollars sent out and repaid. And also ignoring that the dollars sent out were considerably more robust than the ones repaid. Those talking points got batted down pretty quickly though, and for the most part no one is trying to sell TARP as good policy anymore. (The exception is the unconquerable wankery of Matt Yglesias, who writes with the smooth assurance of one who never considers an idea he does not find congenial.)
So being linked to TARP has been toxic for politicians of all stripes, and for good reason. In the first election cycle after it, Republicans paid a particularly heavy price (it haunted them in 2012 as well). When TARP wasn’t mentioned as the main cause of primary losses it was still described as the catalyst. And while Bennett told Hayes that health care reform had as much to do with his loss as TARP, look at the interview he gave NPR immediately after his loss. He mentions TARP first, last and multiple times in between. Yes he mentions other factors as well, but he clearly characterizes TARP as the albatross around his neck.
TARP was an enormously consequential program, it was terrible policy, and it became verbal shorthand among the non-wonkish general public for a whole raft of opaque and tricky bailout schemes for the criminals who looted the economy. That sort of thing tends to linger in the memory. Political and media elites of all ideological stripes would prefer not to talk about it because it is such an obvious indictment of their established institutions, but that doesn’t mean the rest of us have to look away.
I tend to have a heightened awareness for curious omissions of TARP. I don’t think individual examples can have motives assigned, and in Hayes’ case it just seemed like a tangential point that didn’t get touched on. I might have felt better if I thought there was some nefarious intent though. At least then there would be an implicit acknowledgement that something big was being ignored. Instead we have a situation where the powers that be would rather not talk about it. The best way to not talk about it is to not think about it. The best way to not think about it is to forget it ever happened.
1. Like many of his Republican colleagues, he has confused cantankerous badgering with tenacious pursuit (and semi-random, blunderbuss criticism with knowledgeably drilling down on a particular point).
2. This report (PDF) from the TARP inspector is worth looking at, too. If nothing else try to read the paragraph beginning “Despite this initial Government assistance” - it gives a nice illustration of the “TARP as tip of the iceberg” dynamic.