Originally published at Extra!, the magazine for Fairness and Accuracy in Reporting.
Michael Corcoran and Stephen Maher
For corporate media, the verdict is already in: The Troubled Assets Relief Program (TARP), the unpopular program that redistributed some $700 billion of U.S. taxpayer funds upwards, to the very financial institutions that contributed to the worst economic crisis since the Great Depression, is an unabashed success.
It is hardly stunning that corporate media would react favorably to one of the biggest boons for big corporations in U.S. history. When the bailout initially failed to make it through Congress in 2008 due to House opposition, journalists quickly accepted and reinforced the narrative that the unpopular legislation--which gave unprecedented power to the Treasury Department with virtually no mechanism for oversight or review--needed to be passed so urgently that a serious national debate was not even possible (Extra!, 1/09).
"In the Congress of the United States, the insane are now running the asylum," wrote Dana Milbank in the Washington Post (9/30/08). The Post editorial page produced three editorials in three days (9/30/08=10/2/08) in support of the policy. New York Times columnist Thomas Friedman (10/1/08) claimed, "We have House members, many of whom I suspect can't balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don't understand, swamped them with phone calls."
As Dean Baker and Kris Warner of the Center for Economic and Policy Research noted (Extra!, 1/09), despite claims echoed throughout the media that the bill was too urgent to even be subject to reasonable scrutiny, the Treasury Department "took no action for 10 days after the bill had been passed."
Now that the program is coming to an end, media--with a few notable exceptions like Gretchen Morgenson at the New York Times (4/18/10)--are claiming the corporate bailout they so fervently supported has been a monumental success. Two primary claims have been pervasive: that TARP was a good idea that’s “working,” and that it was a “great deal for taxpayers” (Washington Post, 4/1/10). Progressive critiques challenging the official narrative have been almost entirely ignored by the corporate press, despite the fact that such challenges have appeared throughout alternative media (Pew Research Center, 4/28/10; FireDogLake, 7/15/10).
In the words of the Post editorial board (7/5/10), even though "pretty much everyone hated" the "$700 billion bailout fund," it has "arguably saved the U.S. economy.... Any member of Congress who supported TARP, Republican or Democrat, took a sensible risk that has been vindicated by the program's result."
Similarly, Reuters (8/19/10) reported that TARP's success would "dilute the previously potent political attack that lawmakers who voted for the bailout were rewarding Wall Street greed while putting taxpayers at risk." Former George W. Bush administration official James K. Glassman declared in a Wall Street Journal op-ed (8/26/10), "It has to be said that the TARP and the other financial rescues were necessary and efficient."
Prominent progressive critics contend TARP is a program that is doomed to failure. Even if it succeeds in temporarily rescuing the financial sector, the failure to enact broad systemic changes only increases the risk of future, more expensive bailouts. Dean Baker, for instance, suggested (CEPR, 7/5/10) that the "financial Armageddon" averted by TARP
>>>would have meant the demise of Goldman Sachs, Morgan Stanley and most of the other Wall Street titans, but probably would not have led to a qualitatively worse economic situation for the rest of us than what we actually saw. In fact, there would have been a great benefit from this financial Armageddon in that it would let the market wipe out the fast-dealing, high-flying Wall Street gang in a single blow.
This would eliminate the culture of synthetic CDOs and naked credit default swaps that provide ever more sophisticated and expensive ways to gamble. It would also eliminate many of the huge multi-million dollar paychecks that the Wall Street boys take home every year (or week). In other words, this is not obviously a bad story.<<<
Financial blogger Yves Smith (Naked Capitalism, 6/23/10) likewise criticized the Obama administration’s choice to “patch the system up with duct tape and baling wire, and if it looks even remotely operational, tout it as tremendous success,” rather than enacting serious reform. The choice, she continued, reflects the administration’s "decision to reconstitute, as much as possible, the banking industry that had just driven itself and the global economy off the cliff” and “to cast its lot with an unreformed banking industry."
Yet these important ideas were rarely presented to the American people by the corporate-owned press, thus limiting their impact and damaging citizens’ ability to come to informed conclusions. "I have almost never had my criticisms of the TARP in the media," said Baker in an e-mail to Extra!.
Indeed, media adhered to their time-honored practice of framing the debate between centrist Democrats and far-right conservatives (Extra!, 9=10/04)--in this case, restricting the “debate” to pro-TARP voices on one side and militant free-market absolutists on the other, who oppose the program as a violation of laissez-faire principles. That was the form the debate took on Fox Business Channel (12/22/09), TARP supporter Lawrence Ausubel, economics professor at University of Maryland, faced off against Cody Willard, a right-wing libertarian critic.
A New York Times article (7/1/10) looking back on TARP included critiques of the plan from conservatives like Sen. Richard Shelby (“blatant accounting fraud”) and Rep. Spencer Bachus (“a ridiculous scheme”), but ignored progressive critics in Congress, such as Rep. Dennis Kucinich and Sen. Bernie Sanders.
The claim that the taxpayers are being fully reimbursed by beneficiaries of TARP is likewise being vigorously advanced by the corporate press. The New York Times has been ebullient regarding the program's outcome for some time now (8/30/09): "Nearly a year after the federal rescue of the nation’s biggest banks, taxpayers have begun seeing profits from the hundreds of billions of dollars in aid.... So far, that experiment [TARP] is more than paying off."
More recently, the Times' Andrew Ross Sorkin asked (4/12/10), "What if, after all that panting over Washington’s bailout of the financial system, we learned that it actually worked?" He continued:
>>>Some officials [are] suggesting that if the economic recovery continues apace, the bailout program could eventually turn from red to black. That may seem far-fetched to anyone who remembers the dire predictions about banks like Citigroup, but the numbers tell a different story. The government’s $45 billion investment in Citigroup alone is on track to make a profit of nearly $11 billion, plus $8 billion or so in interest and other fees. People inside the administration no longer refer to Citigroup as the "Death Star"; now it is a "profit center.”<<<
Dean Baker (Beat the Press, 7/5/10) wondered whether the assertion that TARP did not cost the taxpayers anything is “based on ungodly stupidity or is just plain dishonest”:
>>>The TARP money was a form of insurance. The vast majority of insurance policies are never paid off, but that does not mean they have no value. The point here is that the banks were on the edge of going bankrupt. The government, through the TARP and the Fed, gave the banks the loans and the guarantees that assured the markets that the banks would survive.... This is all a gift from the taxpayers to some of the richest people in the country.<<<
In a rare instance where a progressive critic was quoted by the mainstream press on the issue--albeit buried in an otherwise upbeat TARP story by Sorkin (New York Times, 4/13/10)--Nobel laureate in economics Joseph Stiglitz said widespread efforts to glorify TARP's success are "disingenuous and a real attempt to distract people," as they don't factor in lost interest on the money spent. "Did we get back anything commensurate with the risk?... Clearly the answer is no," he said. Sorkin dismissively reminded readers that Stiglitz "has made a career of seeing every glass as half-empty."
Even Elizabeth Warren, who has been featured in the news as a potential leader for the new Consumer Financial Protection Agency, has been largely ignored by the press when she reported on TARP’s flaws. As the chair of the Congressional Oversight Panel monitoring the use of TARP funds, she issued a strong critique of TARP's impact on small banks in the panel's July report (Congressional Oversight Panel, 7/14/10), saying TARP "served Wall Street much better than anyone else." Neither the Post nor the Times published a single article citing Warren's findings. The panel’s May report (Congressional Oversight Panel, 5/12/10), also quite critical of aspects of TARP, was mostly ignored as well, getting only two small mentions in the Post (5/19/10, 8/4/10).
When TARP was pushed through with no sizable programs attached to help the average American (Economic Policy Institute, 9/29/08), the priority for policy makers became clear. As Baker observed in CounterPunch (6/2/10), the same people who praise TARP are now saying we must “act aggressively now to reduce the budget deficit” and “accept large cuts in Social Security and other important programs.”
"Why on earth," Baker asks, "should anyone trust what the bankers' economist accomplices are telling us?"
