TARP did stabilize financial institutions, helping—along with the Federal Reserve's emergency-lending programs, the stimulus bill, and other Treasury programs—to avoid economic catastrophe. Moreover, it did so at no cost. When TARP first arrived on the scene, the Congressional Budget Office anticipated its price tag at $300 billion. This week, TARP's bank programs actually moved into the black. When all is said and done, taxpayers stand to make about $20 billion.
So maybe we cannot agree whether TARP was a success or a failure.
TARP helped us avoid economic catastrophe and cost nothing, so maybe we can't agree if it was a success or a failure. Huh ?
The deleted part notes that HAMP failed totally and asserts that TARP "reduced moral hazard." She clearly means "increased moral hazard." The confusion of "increased" and "reduced" is not the only sign that Lowery doesn't understand the concept of moral hazard. The banks paid their debts or went bankrupt. Their creditors didn't all pay the banks. This does not create moral hazard for the banks. There is moral hazard -- bank shareholders were robbed blind by their crooked employees. There is continuing moral hazard, the suckers are still letting the crooks pay themselves bonuses. But the problem isn't that the Treasury made profitable deals.
It isn't as if banks are enthusiastic about the chance to send another $ 20 billion to the US Treasury.
I do have a problem with TARP. Why doesn't the Treasury do something like TARP all the time ? TARP was implemented to avoid economic catastrophe. The secretary of the Treasury was a former Goldman Sachs CEO. He gave the banks an very generous deal. And the Treasury still made money. The reason is that bearing risk is generously rewarded. The US Treasury shouldn't be risk neutral of course, it should seak to bear risk -- such risk bearing is an automatic stabilizer. The only reason that it doesn't invest in risky assets is because, if it did, it would drive Wall Street out of business.
To me that is the most attractive feature and not a bug.