No More TARPs?

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In the Wall Street Journal today, Deborah Solomon and Naftali Bendavid point out that while TARP was wildly successful at rescuing the American banking system, it remains wildly unpopular with the American public anyway. And this might be a good thing: bailouts encourage moral hazard, and the fact that TARP is so unpopular means “the chances of another government bailout are essentially nil.” Dan Drezner comments:

Now, truth be told, I’m not sure this is entirely accurate. Sure, rescue packages are unpopular now — but let the Dow Jones Industrial Average fall 800 points and politicians might react differently. If, however, the political perception is that no more bailouts from DC will be forthcoming, then it might condition financial players to act in a more prudential manner.

In other words, the Tea Party activists on the right and the netroots activists on the left might be the political lobbies that do the most to preserve the integrity of the U.S. financial system. I’ll be spending the rest of the day savoring this irony. I welcome commenters trying to burst my cognitive bubble, however.

OK, I’ll take a shot at that. There are only two possible states for any major economy: one in which large scale bank failures are impossible, or one in which the central government prevents large scale bank failures. Now, does anyone think the reforms of the past year have made large scale bank failures impossible? Anyone? Bueller?

Eventually a banking crash will happen again. Maybe sooner, maybe later. And when it does, the U.S. government — even a U.S. government run by Sarah Palin or Dennis Kucinich — will rescue the banking system. Because it won’t have any choice.

All the big talk aside, everyone knows this and all the evidence suggests that banks know it too and haven’t changed their behavior a whit. TARP was, after all, not the first banking rescue in history. Just in the last 20 years various governments have bailed out Long Term Capital Management, the Swedish banking system, the Mexican banking system, the American savings and loan industry, and a motley collection of southeast Asian banking systems. That’s not even a full list, and guess what? It didn’t stop banks around the world from acting stupidly in the aughts, and it didn’t stop governments around the world from saving their bacon. Because they didn’t have any choice.

So forget the talk about how TARP is so unpopular that it can never happen again. Of course it can, because neither the tea parties nor the netroots left has any real influence on U.S. economic policy and the banking industry knows this perfectly well. The next time they fuck up, they’ll be rescued. All it will take is another banking crisis.

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Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

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Truth #5: It's about minority rule.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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