TARP was the absolute height of crony capitalism. Many of the big banks should have gone down, but in the midst of a “Blackberry panic” – as David Stockman puts it – the masters of the masters of the universe lost sight of reality and the nature of markets. Yes, Goldman Sachs would have gone down. But this would have been a GOOD THING. The blood which should have filled the the streets of Downtown Manhattan would have washed the unsustainable leverage clean from the system (for a while.) Giants are meant to fall. It would have been good for the economy.
It would have been terrible for Wall Street of course. Banks, livelihoods, careers, and reputations hung in the balance that fall of 2008. For the bankers the world was indeed ending. So in a selfish act of desperation they forced the American public to save them.
Now Tim Geithner is trying to make it out like TARP wasn’t an act of theft. That TARP was in America’s best interest. That though the banks got bailed out while average Americans were being turned out into the street by the very banks which got bailed out, and even IF TARP were a grossly unjust measure, the American people made a “profit” on their investment. So we should thank him. Geithner sites a return of 1% annualized over 5 years as a good return. Given even the artificially modest official rate of inflation as calculated by the Fed that’s still a loss of 5% in real terms.
But the American people “made billions” Geithner says.
In addition to this bit of obfuscation he reportedly never discusses the opportunity costs of intervening as he and his compadres did in the marketplace. Could we actually be 3 years into a non-Fed driven rally (perhaps the first of my lifetime) at this point without all the hocus pocus? I think there’s a good chance that we would have been if we had just let the market work as it was supposed to. But will never know now.
Geithner’s whole premise is that he flushed the market mechanism down the toilet for good reason. That without the interventions which saved his banker friends the world would have imploded. He’s still trying to sell this.
But he’s wrong. Now I felt the pain of the Crash first hand. But in the back of my mind I was thinking – as painful as it is now we will soon be looking at the chance of a lifetime in terms of buying stocks and real estate. Let things settle out. get the insane leverage out of the system and then pick up a house and some stocks while they are relatively inexpensive. This is how great fortunes are made. Lord Templeton for instance made much of his money in the wake of World War II this way.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for July 31st, 2014 | John Ransom
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