I received this email from the Mercatus Center’s Financial Working Group which has some excellent comments on TARP. Click on the link to Garett Jones’s interview at Reason on the “true legacy of TARP.” He makes some good points.
What Lies Beneath: The True Cost of TARP
In the last week, a rash of commentary has attempted to assess the true cost of Troubled Asset Relief Program (TARP). Many point out that in the final calculation, the budgetary cost may very well be less than $19 billion, far lower than the initial $700 billion commitment, or the $247 billion initial projected cost – an unheralded success. But the true economic cost may be far higher.
In a recent interview, FMWG member Garett Jones points out that the true legacy of TARP may be the stubborn entrenchment of a “too big to fail” regime. As he puts it, “the big message of the financial crisis is that you want to become too big to fail.” Indeed, recently resigned Special Inspector General for TARP, or “TARP cop,” Neil Barofsky said in a recent Congressional hearing: “[TARP] has increased the potential need for future government bailouts by encouraging the ‘too big to fail’ financial institutions to become even bigger…therefore increasing their ultimate danger to the financial system.”