Are We Turning a Profit on TARP?

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For the banks, for the government, for taxpayers and for their precious debt-burdened children, this is some welcome good news: TARP could turn a profit. This article in the New York Times (see graph below) spots a 15% profit from eight of the big banks that have repaid their TARP funds. Somewhere in the Hamptons, Hank Paulson is gleefully scribbling a footnote to his memoirs.


I'm with Yglesias. TARP might not have been perfect, but it provided clutch funds for teetering banks during the darkest hours of the recession, and its early returns are positive. Not bad for a ongoing government working through the most complicated financial crisis we've ever seen. Here's the key graph:

tarpprofit.png
And here's the most important observation of the piece: The government is still a long way from recovery from its historic bailout of the financial and mortgage industries:

The government still faces potentially huge long-term losses from its bailouts of the insurance giant American International Group, the mortgage finance companies Fannie Mae and Freddie Mac, and the automakers General Motors and Chrysler. The Treasury Department could also take a hit from its guarantees on billions of dollars of toxic mortgages.

Here's what I still find incredible. In twenty years, we'll likely look back on Obama's first term and praise or criticize him for a swift or stalled recovery. But what's amazing is that some of the most important and lasting decisions were made in the waning months of a lame duck presidency. TARP was a Paulson/Bernanke brainchild. The AIG bailout was a Paulson/Bernanke production. The takeover of Fannie and Freddie was in September 2008. The first-round auto bailouts were one of Bush's final contributions. When history's verdict on the recovery plans emerges, it focus on two months -- September and October -- during which time the public was arguably more focused on a campaign. Pretty amazing.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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