Comments on: The Utility and Justice of TARP

By: Patrick

Patrick — Tue, 01 Dec 2009 20:15:28 +0000

You could measure (from federal reserve data sets) overnight lending between banks in the weeks before TARP was announced (huge dropoff) and then after TARP was passed. And or also, measure lines of credit that small businesses use to meet payroll. I remember that these got locked up during the panic and small businesses were worried they weren't going to make payroll (line of credit extended by bank based on the small business invoices to clients/customers) and would have to layoff.

By: horsecow

horsecow — Fri, 20 Nov 2009 13:39:31 +0000

I have no expertise to offer here — I assume the players involved had a pretty specific idea of what would happen if they didn't take some action, but they could (and should) make that case themselves — but what I find troubling about Will's point is that it allows him to have his cake and eat it too. He gets to live in the present where (for now) a complete economic meltdown has been averted, but also live in the past where we can reject the TARP plan, as if that decision in the past had nothing to do with conditions in the present. It's just another kind of unfalsifiable counterfactual. Maybe if we had rejected the TARP plan things would have turned out great, or maybe we'd be living in a Mad Max post-apocalyptic hellscape. In an alternate universe, maybe WW is sitting in a bombed-out office block, vainly imitating the practice that in the Good Old Times was known as “blogging”, typing the following sentence on the broken shell of a laptop: “Maybe TARP would have been a good idea after all…”

By: mfarmer

mfarmer — Fri, 20 Nov 2009 12:38:19 +0000

This paints somewhat of a different picture

http://abcnews.go.com/Business/SmallBiz/small-b...

By: spacebunny

spacebunny — Fri, 20 Nov 2009 12:27:45 +0000

“I would disregard the opinion of anyone without a graduate degree, as I do on all topics.”

Because the only people whose views matter are those who can afford an advanced degree. And knowledge and intelligence only exist if recognized by the appropriate Ivy League authorities.

By: y81

y81 — Fri, 20 Nov 2009 11:38:50 +0000

"the smaller and medium size banks were prevented from rising to the occasion. "

That would be more plausible if a significant portion of the TARP funds hadn't gone to smaller and medium size banks.

In general, I would analyze this question, about the beneficial effects of TARP, the same way I would analyze global warming, i.e., by asking: What is the preponderance of opinion among academic specialists who study the issue (i.e., in this case, economists)? What is the preponderance of opinion among industry participants? I would disregard the opinion of anyone without a graduate degree, as I do on all topics.

By: Eric H

Eric H — Fri, 20 Nov 2009 10:46:42 +0000

Yes, as Matthew has discovered, posting nonfalsafiable counterfactuals can be fun and easy. For example, I believe that absent policies that encourage home ownership, TARP would not have been necessary.

By: mfarmer

mfarmer — Fri, 20 Nov 2009 09:56:46 +0000

I don't know if TARP was necessary, and someone much smarter than I am will likely come up with a scenario showing the financial industry was much more resilient than anyone could/would admit, and that TARP was a giant, expensive bandaid which didn't address fundamental problems, like big banks having too much political power, which only a free market adjustment can resolve.

My instincts tell me that TARP was a protection act to maintain government/corporate enmeshment, and that the smaller and medium size banks were prevented from rising to the occasion. My instincts are certainly fallible, but I still believe what was done was a statist reaction rather than a free market realignment which would have dealt with fundamental problems.