George W. Bush Looks Back at TARP: His Most Difficult Decision Point

 

The Decision Point: As Senators John McCain and Barack Obama listen, President George W. Bush announces the TARP program on September 25, 2008.

In his new memoir, Decision Points, George W. Bush recounts the battle over the Toxic Assets Recovery Program (TARP) which is still having an impact in GOP politics. He quotes Sen. Jim Bunning (R-KY) as saying TARP would “take away the free market and institute socialism in America.”  A full page ad sponsored by Americans for Tax Reform and its president, Grover Norquist, simply said “Dear President Bush: No.”

The TARP critics said it was better to let the American banking system fail even if the nation had to endure a depression. Former Gov. Mitt Romney (R-MA) disagreed, said the critics had no realistic alternative, and supporting TARP “was the correct and courageous thing to do.”

The legislation was also endorsed by the conservative magazine National Review.  This week talk show host Rush Limbaugh asked the former President: “If you had it to do over, would you do the TARP bailout?” Bush responded: “Yeah, I would have. I didn’t like it at all, but when you’re president you get faced with stark choices, and I couldn’t have lived with myself had the country gone into a deep depression, and people’s lives would have been affected.”

In Decision Points he says:

The strategy was a breathtaking intervention in the free market. It flew against all my instincts. But it was necessary to pull the country out of the panic. I decided that the only way to preserve the free market in the long run was to intervene in the short run. It helped spare the American people from an economic disaster of historic proportions. I had to safeguard American workers and families from a widespread collapse. . . It was a hell of a lot better than a financial collapse.

The Bush Administration’s outlay of $350 billion in TARP funds will certainly break even, and the government has already  made $28 billion in profits. All the major financial institutions which received funds from the Bush administration were  eventually able to meet requirements established by the Treasury Department.

The remaining investments in banks are small. Even the Obama administration has a fairly admirable record on TARP. They will be able to demonstrate that 90 percent of the original $700 billion will not have been spent or was returned to the taxpayers.

All six of the biggest U.S. credit-card issuers have returned their bailout money, and these initial TARP funds were repaid about a year after their distribution. Citigroup was one of the hardest hit banks and received $45 billion in bailout money, more than any other financial institution. The Treasury paid $3.25 a share for its stake in the bank during the 2008 credit crisis. The good news for the taxpayers is that the shares increased steadily in value, and the government received a hefty profit of over $9 billion.

This is a far different outlook than what was predicted during the final weeks of the 2008 campaign. At that time many politicians were predicting TARP would lose $700 billion. Without TARP, many people with pension funds and annuities would have lost everything. TARP unfroze the credit markets in November and December of 2008, restored confidence in the banking sector and stopped any further runs on the dollar. In his recent TARP testimony, Treasury Secretary Timothy Geithner said:

The program was essential to averting a second Great Depression, stabilizing a collapsing financial system, protecting the savings of Americans and restoring the flow of credit that is the oxygen of the economy. It achieved all that at a lower cost than anyone expected. . . The much less severe savings and loan crisis of the late 1980s and early 1990s cost 2 1/2 times that as a share of our economy. . .

The U.S. financial system has been completely overhauled and is in a much stronger position today than before the crisis. In fact, the weakest parts of the system are gone. Of the 15 largest financial institutions before the crisis, four are no longer independent entities. Five were forced to restructure. Two are subject to much stricter federal oversight. Ten have seen major changes in senior management and boards of directors.

A Washington Post editorial on the day TARP ended, October 3, 2010, noted:

TARP, reviled by populists of the left and right, produced more benefit for the U.S. economy at lower cost to taxpayers than even its strongest initial supporters expected. . . There is no denying that TARP is not the sort of thing the U.S. government should normally undertake.

Still, the costs of TARP — tangible and intangible — have to be considered in the context of the unprecedented emergency that faced the policymakers who adopted it. They must be weighed against the costs of not intervening. Financial stability is a public good, but it isn’t free. TARP helped save the United States from an economic collapse and bought time to get America’s house in order under calmer circumstances. Goodbye, TARP. Good riddance — and thanks.

Five Myths About TARP

The below article from the Washington Post is by Treasury Secretary Tim Geithner and it makes many observations about the effectiveness of TARP. The program worked and the financial security of all Americans is much stronger today because of it. As of now it will cost $50 billion and saved our economy, and in the end it may break even.

Elizabeth Warren and Another Dumb Liberal Prediction

TARP Congressional Oversight Panel chair Elizabeth Warren with Treasury Secretary Tim Geithner.

At his press conference today, the President broadly hinted he will soon appoint Liz Warren to head the new Consumer Financial Protection Bureau. Liberal columnist Brent Budowsky of The Hill foolishly predicts: “The Democratic base will erupt and turn out to vote in far greater numbers than any current poll suggests. …
This campaign is in the ninth inning, the bases are loaded, and if the president hits the ball out of the park and names Elizabeth Warren, it will be the single most powerful inflection point in many months, to the Democrats’ advantage, and change the campaign of 2010 to a rousing fight to the finish that could well save the Democratic House of Representatives.”
Liz Warren is a star in Michael Moore’s world, but the public does not know her. She will never be confirmed before the election. Budowsky wants us to believe “the Democratic base will erupt” because of a bankruptcy law professor from Harvard? The President could name 10 liberal activists from the Harvard faculty to senior positions but that would have no impact on the midterm elections. If they are not already motivated by significant GOP leads in a wide range of Blue states, it is going to be very difficult to get them excited.

Profiles in Courage: Congressman Gresham Barrett Will Lose Today, But the Nation Can Thank Him

State Rep. Nikki Haley (R-SC) has a huge lead in today’s gubernatorial primary, and she may win without a run-off. Congressman Gresham Barrett, Lt. Gov. André Bauer and Attorney General Henry McMaster are all scrambling for second place and the right to face Haley in a second round of balloting.
Most polls have Congressman Barrett in second place, but he is trailing Haley by as much as 20%. Fellow SC GOP Congressman Bob Inglis is also fighting for his political life and will almost certainly be forced into a run-off. The Greenville News endorsed Inglis and said he is “in political trouble for his vote in the fall of 2008 supporting the rescue of the country’s banking system.”
That is also true of Barrett. At every campaign appearance this year Barrett has had to defend his October 2008 vote in favor of the Troubled Assets Relief Program (TARP). Barrett and Inglis have been consistently booed in front of Tea Party crowds.
The first time TARP came up for a vote, Barrett did not support it. Then he saw the stock market immediately collapse by an unprecedented 1000 points and was told the entire American banking system was in danger of shutting down, and the result would be another great depression.
Barrett changed his mind and supported TARP on the second vote. The stock market eventually collapsed from 14,000 to 7,000 by the time President Obama took office.
Unlike Barrett, Congressman Inglis had other controverisal votes. He did not support Bush’s troop surge in Iraq and he voted for cap and trade.
Many primary voters are confusing TARP with the huge deficit created by Obama’s stimulus, the omnibus budget resolution and health care reform. Now that 18 months have passed, the TARP program can be reviewed.
The Bush Administration’s outlay of $350 billion in TARP funds will certainly break even, and it may result in a profit. All of the major financial institutions which received funds from the Bush administration have been able to meet the requirements established by the Treasury Department.
Over 90% of these funds have now been repaid with five percent interest, and the government earned $19 billion. All six of the biggest U.S. credit-card issuers have also returned their bailout money, and these initial TARP funds were repaid about a year after their distribution.
Citigroup was one of the hardest hit banks and received $45 billion in bailout money, more than any other financial institution. The Treasury paid $3.25 a share for its stake in the bank during the 2008 credit crisis. The good news for the taxpayers is that the shares increased steadily in value, and the government will receive a hefty profit of $9 billion.
This is a far different outlook than what was predicted during the final months of the 2008 campaign. At that time many politicians were predicting TARP would lose the entire $350 billion in its first installment.
Without TARP, many people with pension funds and annuities could have lost everything. TARP unfroze the credit markets in November and December of 2008, restored confidence in the banking sector and stopped any further runs on the dollar.
The critics of TARP said it was better to let the American banking system fail even if the nation would have had to endure a depression. Former Gov. Mitt Romney (R-MA) says supporting TARP “was the correct and courageous thing to do,” and the legislation was also endorsed by the conservative magazine National Review. South Carolina GOP activist Stacy Slaybaugh Arena was at the Greenville TEA Party when Congressman Barrett was booed by over 4,000 people. She recalls:

Gresham was booed, heckled and mocked. I remember feeling bad for him. I remember thinking how brave it was for him to attend and to try and speak in the midst of all the criticism. He knew the TEA Party took issue with him before the event, but he still showed up.
Like a man, he took his lumps. I was embarrassed by those in the crowd that kept hollering over and over again for the Congressman to “GO HOME” while he tried to explain TARP and to reason with them. I have total respect for anyone who will stand up and support their viewpoint.

On TARP, Congressmen Barrett and Inglis did the right thing. It will end their political careers today, but the nation can be grateful. In endorsing Rep. Barrett, former Vice President Dick Cheney said:

I’m certain Gresham knew his vote in support of TARP wouldn’t be popular, but he did something far too novel in American politics today: He put the interests of his country ahead of his own. That’s why voters should not believe the false attacks from his opponents. When it was time to make decisions and show leadership, Gresham stepped up while they all stayed silent and ducked for cover. That may make for good politics today, but it certainly isn’t leadership.

June 21 Update
The tracking numbers are not good for Congressman Barrett and Nikki Haley will be the next Governor of South Carolina. She will do a fine job, but I will always consider Gresham Barrett a hero. He put our nation first when the economy collapsed in September of 2008, and his 8 years on Capitol Hill resulted in new nuclear power plants for the first time in 34 years. I hope his leadership will be recognized some day.
He says, “My record over the last several months has been distorted. I am not a liberal. I am not a moderate. Unfortunately, a lot of people have disagreed with my TARP vote and can’t get over it. There’s nothing I can do about that. It is what it is. I had to make a decision based on the information I had at the time. I did and I voted for it.” Gresham Barrett definitely made the right decision for the American economy, and the wrong decision for his political career.

Dick Cheney – "I Expect That From MSNBC But Not From Fellow Republicans": Will TARP Doom Another GOP Candidate

PHOTO: The candidates in the June 8th South Carolina GOP gubernatorial primary include State Rep. Nikki Haley, Lt. Gov. André Bauer, Rep. Gresham Barrett and Attorney General Henry McMaster.

Former Vice President Dick Cheney has just released a hard hitting statement endorsing Congressman Gresham Barrett for Governor of South Carolina. Barrett’s has a lifetime American Conservative Union rating of 98% and is a former Army field artillery captain. Nevertheless, his campaign has been struggling in the polls all year.
A PPP survey released last weekend gave State Nikki Haley a huge lead with 39%, while Attorney General Henry McMaster had 18%, Barrett was at 16%, Lt. Gov. André Bauer 13% with 14% undecided. The survey was conducted before allegations were made against Haley about an extra martial affair.
Barrett’s major problem is primarily due to one issue, his vote for the Troubled Assets Relief Program (TARP) in October 2008. Barrett has been booed in front of Tea Party crowds, and has consistently been on the defensive. The first time TARP came up for a vote, Barrett did not support it.
Then he saw the stock market immediately collapse by an unprecedented 1000 points and was told the entire American banking system was in danger of shutting down, and the result would be another great depression. Barrett changed his mind and supported TARP on the second vote.
The TARP vote has already been a significant factor in primary defeats suffered by Senators Bob Bennett (R-UT) and Kay Baily Hutchison (R-TX). Her opponent, Gov. Rick Perry (R-TX), often referred to her as “Kay Bailout Hutchison.” TARP is also being used against Rep. Peter Hoekstra (R-MI) in his gubernatorial campaign.
Joining Cheney in support of Barrett is Sen. Lindsey Graham (R-SC), GOP Conference Chairman Mike Pence, Gov. Bob Riley (R-AL) and the American Conservative Union. State Rep. Nikki Haley has the support of retiring Gov. Mark Sanford (R-SC) as well as former Governors Sarah Palin (R-AK) and Mitt Romney (R-MA). Romney says supporting TARP “was the correct and courageous thing to do,” and the legislation was also endorsed by the conservative magazine National Review. Lt. Gov. André Bauer has been endorsed by former Gov. Mike Huckabee (R-AR) while Attorney General Henry McMaster has the backing of Sen. John McCain. The Cheney statement said in part:

Today, I am strongly endorsing Gresham Barrett. He is is one of the most conservative leaders I’ve ever worked with. No one in South Carolina has done more to fight President Obama’s reckless agenda than Gresham Barrett. On issues of national defense, spending reductions, tax cuts, and eliminating the national debt, his record fighting for the conservative cause is unmatched. Gresham has opposed and fought against every single wasteful Obama spending proposal. Every one.
But there’s a lot of revisionist history going on in South Carolina these days. I expect that from MSNBC, but not from fellow Republicans. So let me set the record straight. I’m certain Gresham knew his vote in support of President Bush and our plan wouldn’t be popular, but he did something far too novel in American politics today: He put the interests of his country ahead of his own. That’s why voters should not believe the false attacks from his opponents. When it was time to make decisions and show leadership, Gresham stepped up while they all stayed silent and ducked for cover. That may make for good politics today, but it certainly isn’t leadership.

Congressman Barrett has had to devote a huge amount of time to defending the TARP vote, and it is always used as a principle attack weapon by his opponents. Attorney General Henry McMaster often refers to the Congressman as “Bailout Barrett.” The Congressman devoted an entire 60 second TV ad to TARP in which he said:

I honestly believe with all my heart that we were at a point where men and women were going to reach into their back pocket and pull out a credit card or ATM card and stick it into a machine and nothing was going to come out. I listened to my president, George W. Bush. I listened to businessman and leaders in South Carolina.
As a leader, I made a decision. Did we stop something that could have happened? Yeah, I believe we did. Has it been implemented like it should have been? No, absolutely not. You can always be a Monday morning quarterback. But leaders make decisions based on the best information that they have, and they go with it. That’s what I did.

If Barrett fails to make the runoff on June 8th the next Governor may want to hire him to assist with business development. Barrett has an impressive jobs creation record and had a key role in luring aircraft manufacturer Boeing to the state. The Congressman is regarded as an anti-union activist on Capitol Hill.
Gov. Mark Sanford (R) is leaving office with high negative ratings primarily due to an extra-marital affair, but South Carolina in a far better fiscal position than most other states. South Carolina has low property and business taxes, and labor unions have little power in the Palmetto State.
Boeing has long been associated with Washington state, but last October they announced plans for a second 787 Dreamliner plant to be constructed in South Carolina at a cost of over $700 million. The plant could mean as many as 35,000 spin off jobs. To remain in Washington state, Boeing had asked the International Association of Machinists (IAM) for a 10 year no strike pledge. When the union failed to meet the demand, Boeing followed through with its threat to build the facility in South Carolina. Companies such as BMW and Michelin also appreciate the state because the chances of a crippling production strike are low.

Was the Bush TARP Program a Mistake?

Many Republicans who supported the Bush Administration’s Troubled Assets Recovery Program (TARP) are now encountering GOP primary problems. Some of these GOP voters are lumping TARP into the same category as the Obama stimulus (which was opposed by every Republican), the $3.6 trillion budget, the costs associated with health care reform and the use of Fannie Mae and Freddie Mac to subsidize irresponsible lending. Some of these voters do not realize that there was a major difference in how TARP was administered by the Bush and Obama administrations.
The voters have already inflicted punishment on TARP backers. Senator Kay Bailey Hutchison (R-TX) was called “Kay Bailout” by her primary opponent, and was defeated in her attempt to win the 2010 GOP gubernatorial nomination. TARP is also a major issue in the primary battles confronting Sen. John McCain (AZ) and Bob Bennett (UT).
Rep. Gresham Barrett (SC) is feeling the heat in his gubernatorial primary, and was booed of a stage because of his TARP support. Many Republicans supported TARP which was proposed by the Bush Administration. In 2008 it was endorsed by McCain and then Gov. Sarah Palin (R-AK). Former Gov. Mitt Romney (R-MA) said supporting TARP was difficult for any Republican but it was the “correct and courageous” thing to do. Romney went on to say:

I hate the way TARP was administered, but I can tell you that we were on a precipice unlike anything we have known before in modern history with the potential of a complete collapse of our currency system and our financial system. Had we not taken action, you could have seen a real devastation. . . TARP prevented a systemic collapse of the national financial system. . . It was intended to prevent a run on virtually every bank and financial institution in the country.

Nicole Gelinas of the free-market Manhattan Institute noted: “We were never going to escape this debacle without pumping massive amounts of taxpayer money into the financial system.”
The first $350 billion TARP installment was spent by Bush and the second $350 billion installment went to the Obama Administration. TARP passed the Senate on October 1, 2008 on a 74 to 25 vote, and the House approved it on October 3 by a 263 to 171 vote.
TARP was supported by 34 Senate and 91 House Republicans, but public opinion was always strongly against TARP. TARP was designed to address the subprime mortgage crisis, and it was enacted during a year of tremendous upheaval on Wall Street.
This difficult year included the sale of investment banks Bear Stearns and Merrill Lynch, the failure of Lehman Brothers and the government rescue of the American International Group, Fannie Mae and Freddie Mac. None of this halted the panic on Wall Street.
TARP was a capital investment in the financial system to prevent a huge collapse. It was essential to save the financial markets because they have an enormous impact on pensions, savings, investments and mortgages. In the fall of 2008 many experts said the worldwide banking system would collapse within days without TARP.
After Lehman Brothers failed in mid-September of 2008, all commercial credit in the United States came to a halt. With the credit markets frozen there was tremendous volatility in the stock market. Bush was told by Treasury Secretary Henry Paulson and Ben Bernanke, the Chairman of the Federal Reserve Board, that a failure to act decisively could plunge our nation into another Great Depression.
They said without a massive government intervention, America faced a total financial collapse because of lost confidence in the banking system. Bush said, “I readily concede I chucked aside some of my free-market principles when I was told by my chief economic advisers that the situation we were facing could be worse than the Great Depression.”
Rep. Sue Myrick (R-NC) spoke for many of the GOP TARP supporters in September of 2008 by saying “We’re on the cusp of a complete catastrophic credit meltdown. There is no liquidity in the market. We are out of time. Either you believe that fact, or you don’t. I do.”
Former Sen. John Sununu (NH) is one of the two Republican members of the TARP oversight panel. He says the program “did help to stabilize financial markets during the critical period of November and December in 2008.”
Republican primary voters are now attacking lawmakers in their own party for supporting a program that A) was created at the behest of a Republican President and B) was central to saving America from a serious depression. The infusion of $350 billion by the Bush Administration was the best way to slow the nation’s slide to the financial edge. The program worked and the Republicans should be glad it did.
UPDATE – TARP Ends, October 4, 2010
As of October of 2010, $67 billion remains outstanding of the TARP funds which went to the auto industry. GM is planning to raise funds through an IPO, an Initial Public Offering. The government is ultimately expecting to lose $17 billion on the auto loans, but at the same time they are making a $9 billion profit just from the money that was lent to Citibank. Treasury Secretary Geithner said:

The returns we’ll get from our investments in banks and AIG will be more than enough to cover the money we’ll lose in autos. The net costs of TARP will be a fraction of their original advertised cost, but profits aren’t the proper measure to use when evaluating TARP. I don’t like to focus too much on just the accounting cost. We weren’t in the business to make money. Even if they had lost much money, that would have been the right thing to do. I think it’s an excellent record for careful financial stewardship.

Geithner pointed to metrics such as the speed at which the price of borrowing came down in 2009, the resumption of economic growth in the second half of 2009, and the speed with which banks raised private capital to replace public funds. As Daniel Gross of Yahoo Finance has written: “TARP has been an enormous success from a policy perspective — it saved the financial system and averted a second Great Depression at a very low price to taxpayers. But politically, like the assets it was designed to remove from banks, it remains toxic.”

It should also be noted that TARP was not the only effort to unfreeze the credit markets. In the words of Robert Samuelson, the Federal Reserve also “devised ingenious ways to provide credit to parts of the financial markets (commercial paper, money market funds) that were being abandoned by private lenders. For almost two years, it held its short-term interest rate near zero. All this arguably averted a second Great Depression but obviously did not trigger a vigorous economic recovery.” In late 2008 the Fed authorized a $1.725 trillion purchase of Treasury bonds, mortgage backed securities and Fannie Mae and Freddie Mac bonds.

“The Tale of TARP”, Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/02/AR2010100203366.html

Bush's $350 Billion TARP is About to Break Even

The Obama administration announced today that over the next year it will begin to sell the government’s 7.7 billion shares in Citigroup. The Citigroup shares are one of the last remaining legacies from Bush administration’s first installment of the Toxic Assets Recovery Program (TARP). The sale means the Bush outlay of $350 billion in TARP funds will break even, or result in a profit.
All of the major financial institutions which received funds from the Bush administration have been able to meet the requirements established by the Treasury Department. Over 80% of these funds have now been repaid with five percent interest, and the government earned $19 billion. All six of the biggest U.S. credit-card issuers have also returned their bailout money, and these initial TARP funds were repaid about a year after their distribution.
Citigroup was one of the hardest hit banks and they received $45 billion in bailout money, more than any other financial institution. The Treasury paid $3.25 a share for its stake in the bank during the 2008 credit crisis. The good news for the taxpayers is that the shares have increased steadily in value, and the government will receive a hefty profit of between $8 and $10 billion.
The remaining major question mark from the Bush TARP funds is the insurance giant AIG, which has been rapidly selling its assets. The taxpayers could still lose $12 to $20 billion on their AIG investment. If that does happen, it will be subtracted from the $29 billion in profits which were received from Bush’s TARP. Once again, the bottom line is that Bush’s TARP will break even or will result in a small profit. This is a far different outlook than what was predicted during the final months of the 2008 campaign.

The Bush Deficit, the Clinton Surplus and TARP

The 10 year budget outlook

For eight years many liberals complained about the Bush deficit and praised the Clinton surplus. They had an excellent point, but overlooked many key factors. Bush created a Medicare drug entitle­ment which will cost an estimated $800 billion in its first decade. He increased federal education spending 58% faster than inflation. He was also the first President to spend 3% of GDP on federal anti-poverty programs. For some reason the left wing is no longer talking about the deficit.
The above graph does include spending on Iraq and Afghanistan during the Bush years. While Bush did fund the wars through emergency supplementals (not the regular budget process), that spending did not simply vanish. It is of course included in the numbers above.
The Bush deficit declined significantly until early September of 2008 when the global economic crisis began. Bush responded with TARP (the toxic asset recovery program). This was done because $550 billion was pulled out of our financial and investment systems in ONE hour on September 18, 2008. The situation was dire and there was no longer a firewall between the banks and the stock market. There was $40 trillion in outstanding Credit Default Swaps, and most of it turned out to be worthless. That’s more than the GDP of the entire United States for three years.
The Bush administration worked diligently to keep the American economy going. Many conservatives and libertarians were disappointed by TARP. They believed we should leave the economy alone and it would fix itself. The conservative magazine National Review did not agree and supported TARP as a necessary evil. The House Progressive Caucus was opposed but their prediction that it would fail, has not proven true.
TARP was necessary to save the economy from collapse. Letting the banks fail was not the right thing to do and it would have led to a Great Depression. TARP and all of the other government efforts in the fall of 2008 did unfreeze the credit markets. Every single credit indicator (LIBOR, TED spread, A2/P2 spread, intra-bank lending, etc) shows that the markets have significantly unfrozen. The major banks have now passed their stress tests, and they are able to raise capital through the public markets. The American economy survived without a depression. There was no wholesale meltdown of the U.S. banking system. The big banks did not fail.
The taxpayers could still lose $12 to $20 billion on the money given to AIG. That is disappointing, but it is big improvement from a few months ago. AIG received $182 billion from the Federal Reserve and the Treasury.
Many thought the taxpayers were going to get stuck for over $100 billion, but AIG has been rapidly selling assets and the loss will be far less than what was once believed. The real outrage is that AIG lost $98 billion in 2008 but that did not stop them from paying large bonuses after they received the balout money.
President Obama went well beyond TARP with his $787 stimulus in February of 2009. The Stimulus bill includes tax cuts but they are not the type that spur the economy. The economic model of the stimulus bill assumes every $1 of government spending increases the economy by $1.60. By that logic, debt-ridden, big-government countries like Italy, France and Germany should be wealthier than America. Not one House Republican voted for the final stimulus package, which is remarkable.
The moderates did not support it because it was too big, too porky, and hardly stimulative at all. It also wiped out many of Bill Clinton’s excellent welfare reform laws. We did see deficit reduction and economic growth in the late 1990’s.
Bill Clinton and a Republican Congress worked together. They agreed to restore a lower tax rate on capital gains and virtually eliminate capital gains taxes on owner-occupied housing. The galloping economy then reduced the deficit by a record level.
Another major factor was the “peace dividend” after the Cold War. Clinton however did not erase the debt. The national debt went up every single year. The Clinton surplus is also debatable. He took a vast amount of money out of Social Security in order to cover his budgets and give the appearance of reducing debt.

Lawmakers Grill Kashkari on Changes in TARP Plan

Assistant Secretary of the Treasury Neel Kashkari

I just sent this e-mail to Neel Kashkari, the Assistant Secretary of the Treasury. He is the guy in charge of the $700 billion bailout. They really beat him up badly this morning. You can read all about Neel in the “Pages” section of my profile.
Dear Neel:
Please be assured that your many supporters are thinking of you during this difficult time. I was at the entire hearing this morning and it was brutal. I did not bother you because you were so busy coping with lawmakers and the press.
Kucinich’s conduct was to be expected, but the hostility of some of our fellow Republicans was a surprise. It is difficult to image what you must be going through now, and I know you made a tremendous sacrifice to serve in government. Along with everyone who knows you, we are grateful to have a statesman of your caliber leading us through the global financial crisis.
Greg

Lawmakers Grill Kashkari on Changes in TARP Plan
By MICHAEL R. CRITTENDEN, November 15, 2008

WASHINGTON — U.S. lawmakers kept up the criticism of the Treasury Department’s management of the $700 billion financial rescue plan on Friday, accusing officials of being disingenuous in the way they sold the program to Congress.

“I don’t know whether to call this ‘fire, ready, aim’ or something more pejorative,” Rep. Darrell Issa (R., Calif.) said at a U.S. House subcommittee hearing. Treasury Assistant Secretary Neel Kashkari, who is heading up the government’s implementation of the rescue plan, defended the department’s actions, saying that no one should expect the plan to solve all of the nation’s economic problems. “It’s not a stimulus, it’s not an economic growth plan,” Mr. Kashkari told lawmakers. “It’s an economic stabilization plan.”

He also declined to say whether Treasury planned to request access to the second $350 billion before President-elect Barack Obama takes office. Treasury officials, Mr. Kashkari said, have “not made any determination” on when or if such a request could occur. Kashkari defended the Treasury Department’s actions. Lawmakers were especially critical of Treasury Secretary Henry Paulson’s announcement earlier this week that the $700 billion rescue plan likely wouldn’t be used to purchase troubled assets from financial institutions. When conceived during negotiations between Treasury and lawmakers, the plan originally was to have the federal government buy up the assets in order to unfreeze credit markets.

“I think it’s fairly obvious that Congress would have never passed the [rescue plan] had it known how Treasury would marshal the resources it was given,” Rep. Dennis Kucinich (D., Ohio) chairman of the subcommittee, said during his opening remarks.

Treasury’s actions to help homeowners were also a source of criticism. Kucinich accused Paulson of taking scissors to the legislation that authorized the $700 billion, cutting out the section that requires Treasury to use the program to achieve the goal of reducing foreclosures. Other lawmakers said Treasury is too focused on banks and not on cash-strapped consumers. “This administration wants to privatize Wall Street’s gains and socialize Wall Street’s losses,” said Rep. Elijah Cummings (D., Md.).

Mr. Kashkari said Treasury continues to focus on the foreclosure issue and said Mr. Paulson is “passionate” about preventing foreclosures. “We are using every tool at our disposal to get at this problem,” Kashkari told lawmakers. When asked directly by lawmakers how he would solve the housing crisis, Mr. Kashkari said lowering mortgage rates would be the best long-term solution. Lower rates, he said, would allow now-struggling homeowners to refinance into sustainable long-term loans.

Mr. Kucinich also grilled Mr. Kashkari on the Treasury’s role in fostering the acquisition of National City Corp. by PNC Financial Services Group Inc. Lawmakers have been critical of the deal because PNC Financial has received preliminary approval for billions in government funds, while National City was not chosen to take part in the capital injections.

Mr. Kashkari declined to speak about specific institutions, including PNC Financial and National City, but said federal banking regulators determine which banks are allowed to apply for the Treasury’s capital injection program. In a heated exchange with Mr. Kucinich, however, he said Treasury shouldn’t prop up struggling institutions. “I don’t think it’s a good use of taxpayer money to put taxpayer capital into a financial institution that is going to fail,” Mr. Kashkari said. Mr. Kucinich fired back to Mr. Kashkari, “That statement that you just made you will hear about for the rest of your career.”