People often criticize government run programs and with good reason. They are often more expensive than originally thought and have lots of bureaucratic read tape. This may be true on occasion. However, there are some times when the federal government gets it right. One of these cases is the Troubled Asset Relief Program.
TARP was a $700 billion dollar bailout of the banking sector. The program recapitalized the financial sector by injecting money into the nation’s largest banks. TARP has been heavily criticized over the past few years but it did succeed in its goal of stabilizing the banking sector. People quickly forget how bad things were for the financial sector back in 2008-2009. Washington Mutual failed and Wachovia was on the verge of collapse. Citigroup (NYSE:C) and Bank of America (NYSE:BAC) were teetering on the brink of bankruptcy. Since the passage of TARP, there has not been a major run on the big banks, money market accounts were bolstered, and consumer confidence has returned to the banking sector.
Dick Bove of Rochdale Securities called TARP the most successful government financial program ever. He credits TARP’s passage with helping to stop the economic collapse and slowing the total amount of bankruptcies. The government may even make a profit from the program. The Treasury and Federal Reserve have made a combined profit of nearly $50 billion dollars. Bove stated:
In short this may have been the most successful United States program ever. Moreover, it was bipartisan in the sense that both the Republican Administration that created it and the Democratic Administration that fostered it were unified in their beliefs as to what should have been done—and they did it.
TARP is an example of good government at work. Maybe there is hope for Congress yet!