WAPO's Heroic Portrayal of TARP Proof of Reporters' Short Memories

The Washington Post’s Binyamin Appelbaum discusses the big banks’ plans to get out from under TARP:

The strongest banks have pressed the administration for permission to repay the aid they received in the fall during the depths of the financial crisis. The government's embrace kept them from collapse, but the firms now are eager to show renewed vigor and escape restrictions, including limits on employee compensation. [Emph. added]

The TARP money “kept them from collapse”? Really? I ‘m not going out on a limb when I state flatly that J.P. Morgan (JPM), Bank of New York Mellon (BK), and Wells Fargo (WFC) would have come through the cycle just fine, TARP or no TARP. Goldman Sachs (GS) and Morgan Stanley (MS), as well. In fact, the only two banks that the TARP arguably “kept from collapse” were Citigroup (C) and Merrill Lynch. And come to think of it, it didn’t even save Merrill. The other 17 banks were forced to take the money—over their considerable objections, I might add--essentially as cover, so that it wouldn’t be so blindingly obvious that Citi needed propping up.

You think I’m nitpicking, but I’m not. Appelbaum’s take has already become the conventional wisdom on why the government’s intervention in the banking business happened in the first place, and will become the template according to which its history will be written. And it will be wrong. By the time that the TARP came around, virtually all the financial institutions that were at risk of collapse from the subprime crisis had already gone down, including AIG, Bear Stearns, Countrywide, Lehman, WaMu, and the GSEs. The only reason the companies that got TARP money were still around to have it shoved down their throats is that they avoided those other firms’ credit mistakes. None (again, except Citi and Merrill) were even remotely at risk. Which is why they're all clamoring to pay it back much earlier than anyone dreamed at the time. It is astonishing how short reporters’ memories can be. Everyone has his own pet peeve with the media, I suppose. This one is turning into mine...

Comments

[Jasper M:]

As much as I loath TARP, and the horse it rode in on, I am not so sure of the author's 'sure survivors' list. BK, sure. But BoA, for example? And who Knows what Goldman's bottom line would have looked like, it AIG hadn't been turned from a defualting counter-party into a cash conduit.
And that doesn't address what sort of issues that survivors would have had in the aftermath of a Citi collapse.

I repeat, I HATE TARP, and wish it had not happened. But I doubt that Citi would have been the only domino down.

Jun 05 03:37 AM

[426350:]

This sort of reporting by Appelbaum is suitable for uTube or something similar, not for responsible media channels. Where is the editorial oversight?

Jun 05 12:54 PM