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It's a Washington, D.C. adage -- one that can help investors understand the public policy process -- and House Financial Services Chairman U.S. Rep. Barney Frank, D-Massachusetts, among others, have said it a dozen times, if not more: "Congress doesn't get credit for not doing something or for avoiding something," Frank has said.
Case in point: TARP I, the initial $350 billion allocation in Troubled Asset Relief Program funds. The initial allocation has been widely criticized as ill-conceived. Some of the money has apparently enabled certain banks to approve large bonuses, allowed others to complete acquisitions or position themselves for the same, or pay-down debt, while not resulting in what Congress intended the allocation to accomplish -- increase lending to businesses and consumers.
Further, the above has produced a Washington consensus, Frank included, regarding TARP I: it has not worked as designed, so much so that TARP II, the second $350 billion, will take a dramatically different form.
What's more, if you asked Americans what they thought of the TARP or 'bank bailout' and what they thought of Congress's performance regarding the program, most comments would not be kind.
Did TARP I fail, like totally?
But does that mean TARP I has failed, that there have been no benefits and that TARP has been an unqualified waste? Well, here's one counter to that argument: the banking system did not collapse.
But will Congress get any compliments or support / recognition from the public for the above? No sir, according to Rep. Frank, et all, because Congress doesn't get credit for not doing something or for avoiding something. Few voters are going to say 'Nice job, the banking system is still operating. Way to go Rep. XYZ.'
Critics of the above viewpoint will no doubt argue that Congress shouldn't get any cheers for keeping the banking system intact because TARP I was designed to increase lending, and by that measure, it's failed.
But the realist would counter that the financial climate and economic conditions worsened since TARP I's debate, and the fact that the system is still operating represents an accomplishment. That's not to say TARP II should not be rigorous in its mandates to get more loans to businesses and consumers or in banning shameful uses of TARP dollars: TARP II should be structured to achieve those goals.
That does take away from the fact that despite a series of financial shock waves and cash crunches far and wide, the banking system is still functioning and processing payments -- the platform is there to prime the pump with stimulus, to use an FDR phrase -- which is no minor achievement in these difficult and trying times.
Fiscal Policy / Economic Analysis: TARP I also illustrates why Congress, in addition to undertaking many low-profile, hum-drum tasks, also must pass 'showpieces' -- projects or work voters will notice. A member of Congress could work on projects that avert mistakes and wrong outcomes for the nation, but still not win re-election, because most voters won't learn about them nor give credit for them. Voters like positive, tangible accomplishments they can see and experience, and TARP I definitely was not one of those.
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Reader Comments (Page 1 of 1)
2-03-2009 @ 7:23PM
SKris said...
Congress deserves no kudos for the way that they have handled the financial crisis. Let's not forget our history:
The market was FLAT from the collapse of Lehman to the time that the government voted on the first version of TARP on Sept 29. The market RALLIED 8.5% on September 18 and 19 when Paulson announced the TARP, and then puked on itself when congress refused to pass it on the first vote. By the time the second vote came around, the market no longer believed that TARP would work, and the S&P fell from 1206 on Sept 28 to 899 on October 10. The market (and economy) moves on psychology. Congress had the last opportunity to stop a complete collapse of that psychology and it BLEW IT. Thanks for NOTHING congress.