Not a bad return on a costly investment

NOT A BAD RETURN ON A COSTLY INVESTMENT…. Whether one approves of 2008’s financial industry bailout or considers it the worst piece of legislation in American history, there’s one thing we can all be very glad about: its price tag.

Even as voters rage and candidates put up ads against government bailouts, the reviled mother of them all — the $700 billion lifeline to banks, insurance and auto companies — will expire after Sunday at a fraction of that cost, and could conceivably earn taxpayers a profit.

A final accounting of the government’s full range of interventions in the economy, including the bailouts of the mortgage finance giants Fannie Mae and Freddie Mac, is years off and will most likely remain controversial and potentially costly.

But the once-unthinkable possibility that the $700 billion Troubled Asset Relief Program could end up costing far less, or even nothing, became more likely on Thursday with the news that the government had negotiated a plan with the American International Group to begin repaying taxpayers.

Two years ago, the assumption among many was that these hundreds of billions of dollars would rescue Wall Street, but that we’d never see that money again. And yet, as of now, it appears likely that the entire initiative won’t cost the American taxpayers a dime — we might actually make money on the deal.

Of course, we almost certainly won’t hear anyone from the administration boasting about these encouraging results, because public revulsion for TARP is unrivaled in our discourse. Indeed, the word “bailout” has managed to become synonymous with “evil,” so much so that nearly every policy debate involves participants trying to figure out a way to characterize the other side’s position as a “bailout” to someone.

Brian A. Bethune, the chief financial economist in the United States for IHS/Global Insight, has raised some criticisms about TARP and its structure, but he called the program over all “a tremendous success. Now obviously, they can’t go out on the campaign trail and say that, because certainly, for a lot of voters, it’s just not going to resonate.” A former investment banker added that the industry rescue “is the best federal program of any real size to be despised by the public like this.”

Matt Yglesias had an interesting take on this earlier, noting that it’s “pretty remarkable” to think the bank bailout, hated though it may be, won’t cost us anything.

Do you think letting the banks fail would have had zero disruptive impact on the economy? None whatsoever? What other programs can you name that garnered support from Nancy Pelosi and George W Bush, helped people millions of people, and had a negative cost to the government? And yet people think it’s horrible, in part because the public sphere has utterly failed to defend it.

That’s a problem, in part because the early days of TARP were a huge success for the public sphere…. It became a lost opportunity for ideological instruction. Instead it’s become a moment of anti-instruction, which people think has demonstrated the lesson that the government consists of nothing but corrupt giveaways. It makes me sad. When it was first proposed, I didn’t understand this issue correctly. But in the ensuing two years, I’ve learned more about it and improved my understanding. The public as a whole, however, as just gotten itself more confused.

Nevertheless, TARP expires this weekend, and going forward, the Treasury “can no longer commit money to new initiatives or recycle repayments to other purposes.”