I do not care who says it, or why. TARP, because it never met its orginal objectives (to purge the toxic home loans from the portfolios scattered throughout every financial institution that was affected), was a consummate failure, and was almost a total waste.
Would the banking system have collapsed? That is only idle speculation after the fact. The reality is, the banking systen had ALREADY collapsed, and the TARP effort was only, at best, a rescue mission, one that failed. What collapsed was, first of all, CONFIDENCE, and confidence, a form of trust, once lost, is recovered only slowly.
Even more slowly, because the remedy used, the nilly-willy injection of cash into the system, did little to shore up or salvage anything from the mess created.
An economic Hurricane Katrina. The storm did not hit directly, but the waves created smashed the levees, and flooded the vulnerable places that lay in harm’s way. Worse, the warning signs were there, and those who COULD have stepped to the forefront to sound the warning and encourage people to make their escape, sat on their hands and signally failed to perform their appointed duties, ending up with the blame being placed on altogether the wrong persons, and assigning the wrong reasons.
Doing nothing would have proved less disasterous in the long run. It was like feeding highly caffeinated coffee to a drunk, you do not sober him up, you just have a drunk who is wide awake and wired.
Per Kanjorski in the video I linked in post #1:
Now Sec Paulson said let’s buy out these sub-prime mortgages, that’s when he came to congress, but he said give us latitude and large authority to do many things as we decide necessary … and give us $700 B to do that.
Shortly after we enacted our bill with those very broad powers, the UK came out and said No, we don’t have enough money to buy toxic assets. Instead we’re going to put our money into banks so that their equity grows and their not bankrupt.
And so the UK started that process and that’s true, it was much cheaper to put money in banks .. as equity investments than to start buying their bad assets because it came early we determined we would probably have to spend 3-4 Trillion of taxpayer’s money to buy these bad assets and we didn’t have that, we only had 700 Billion.
So Paulsen made a complete switch -- went in and started putting money in buying securities and re-investing in the banks of the US.
Why? Because if you don’t have a banking system, you don’t have an economy.