WASHINGTON -- The Treasury Department is worried that the high political cost of some of its key economic intervention programs -- most notably, the bank bailout -- will deter future officials from undertaking meaningful action in the midst of a future crisis, senior officials said at a background briefing Friday. To win back the public, agency officials are doing what any good economist would do: hoping some persuasive charts will do the trick.
This week, Treasury released its latest cost estimates for the Troubled Asset Relief Program (TARP), which has been perhaps the most controversial economic policy of both the Bush and Obama administrations. First signed into law by President George W. Bush in 2008, it was designed to save the financial industry, but it ended up spawning the Tea Party movement, whose followers saw in it all the problems of a too-big government.
The public in general, and the Tea Party in particular, quickly conflated the $700 billion Wall Street bailout with the $787 billion stimulus, damning the latter politically. (A senior official Friday stressed that only $400 billion was actually expended in the bailout, and most of that was returned to the Treasury.)
The effort to defend TARP comes three years after CNBC personality Rick Santelli delivered his famous anti-bailout rant on the floor of the Chicago Mercantile Exchange, which would spark the Tea Party movement. Notably, Santelli was objecting not to the Wall Street bailout, but rather to some homeowners receiving mortgage relief while others didn't.
When asked by reporters at the Treasury briefing why the agency was undertaking this defense of TARP now, a senior official acknowledged that there is no good time to do so. Other officials denied that the timing had anything to do with the politics of the presidential campaign.
Still, they said it was important to get accurate information about the success of TARP out to the public before misperceptions harden even further. One senior Treasury official called TARP one of the most effective, yet least understood, actions the administration took to pull the country out of the financial crisis, stressing that officials want their successors to make decisions based on facts, not on political myths.
The new Treasury charts are intended to underscore the severity of the economic dip, the fact that the recovery has been happening faster than many people realize, the lower-than-expected costs of the financial stability programs, and the long way the country has to go as it still lives in the shadow of the recession.
However accurate in their specifics, the charts are still unlikely to change the minds of critics on either end of the spectrum. Free market ideologues will point to the moral hazards created by a bailout and argue that a bailout that turned a profit would only encourage governments to step in during a crisis, which would therefore make crises more likely. Progressive critics, meanwhile, can still point to the festering foreclosure crisis, rising poverty and unemployment at 8.3 percent.
Whatever Treasury's own accounting shows, since the beginning of the financial crisis the poor have gotten poorer, the middle class has shrunk, and the rich have gotten richer. Somehow, money transferred up, whether it was the specific dollars Treasury and the Federal Reserve doled out or not.
View the Treasury Department charts on TARP (right-click on the document to view larger version):