The Washington Post's TARP Mythmaking, A Recent History

10/15/2010 06:37 pm ET | Updated May 25, 2011

Moe Tkacik's latest piece for her Das Krapital blog at the Washington City Paper fingers Charles Lane for most of the Washington Post's obsequious coverage of the post-crash economy -- from their overarching devotion to Timothy Geithner, to their fussbudgety and nonsensical concern-trolling over Elizabeth Warren to what Tkacik describes as an overall "neglect" of "the economy's more conspicuous challenges -- such as the foreclosure thing, about which they have yet to issue an official proclamation."

But I especially admire the way she skillfully dissects the latest conventional wisdom on the Troubled Asset Relief Program, namely, that it was a "good-news story that's actually true." (You know, as long as no one is watching the Federal Reserve or concerned over the true value of most of the assets on the balance sheets of our major banks!)

Chief among the falsehoods they have spent the past two years robo-peddling ad nauseam is the narrative of the infallible Tim Geithner's sage stewardship of the economy, a narrative that hinges largely on the heroic success of the TARP, one of the few multibillion dollar Wall Street bailout programs Geithner himself played almost no part in designing. (You may recall the story of Hank Paulson bowing down before Nancy Pelosi and begging Jesus for her collusion in the plan.)

Geithner did not particularly like TARP, because it required him to figure out how to do something about foreclosures and that is a giant pain in the ass, but mostly because the bank executives did not much like TARP, because its ostensibly tantalizing $700 billion in federal funds came only at the voluntary subjection to all manner of nods to outmoded notions of "accountability" and "oversight" and "rule of law" and trips down to Washington in which they risked getting lectured by some poorly dressed "elected" official for coming down in the corporate jet. But the Treasury Secretary saw that TARP could be useful to him, because all the publicity it got for actually going down in a place C-Span cameras are allowed made the public think of TARP as code for "all bailouts", thus enabling him to take credit for "ending" the bailouts every time a bank "paid back their TARP money" -- with interest and fees! -- so he could refinance them into a more obscure, less gratingly "transparent" bailout program.

As Tkacik notes, by midsummer of 2010, the editors had taken to the practice of putting "Wall Street bailout" in scare-quotes, as "Thus ends the much-maligned 'Wall Street bailout.'"

Hmmmm. As of June 30th of this year, Citibank had issued $64.6 billion in taxpayer guaranteed debt. Through the end of 2009, those numbers for JP Morgan and Bank of America were $41 billion and $44.3 billion, respectively. These notes are guaranteed under the FDIC's Temporary Liquidity Guarantee Program (open to every bank in the country, these three banks received approximately half of the program's proceeds) and are backed by the full faith and credit of the United States (i.e. you and me). So since Uncle Sam is guaranteeing that debt, the banks were able to sell it to investors at a lower rate. For example, rather than paying investors 8 percent to entice them to buy their notes and bonds, Citigroup would only have to pay 4 percent. The banks are saving money every year thanks to the taxpayer guarantee, and this program is still very much alive.

And if any of these banks were to default on that debt, taxpayers would be on the hook. Were that to happen, WaPo's readers would have every right to complain, "But you guys told us that the 'Wall Street bailout' was over! And that we had won!" Ha, ha: no.

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