SIGTARP

[unixronin]

I'm not sure what SIGTARP should signify in computer terms.  But it would probably be something bad.  Probably related to SIGFAIL.

In this case, though, SIGTARP refers to the Inspector General of the Troubled Asset Relief Program, who has just released the latest official SIGTARP quarterly report.  I'll refer you to cipherpunk for a direct link to the report, in PDF format, and the executive summary on page 6 of the report (not least because if you're not already reading cipherpunk's journal, you probably should be).  But the capsule summary is that, just as many of us predicted, not only did TARP not really fix anything — in fact, the report states that TARP has not achieved any of its stated aims — but in fact it made matters worse.

"We're from the government, and we're here to help."

Comments

[robhansen]

What frustrates me the most about TARP is the utter disingenuousness of its proponents. First it was, “TARP will solve the problem, and structural reforms will keep it from reoccurring.” Now that the Inspector General’s report says it has only kicked the problem a short distance down the road and the promised reforms haven’t materialized (a much less productive set of “reforms” being put in their place), TARP’s defenders are saying something like, “well, it was only meant as short-term relief anyway.”

If they had taken the money on TARP and just sent a check to each taxpayer, that would’ve been short-term relief.

I’ve said it before and I’ll say it again: if an institution is too big to fail, then it’s too big to be allowed to exist. Bailouts should only ever occur when followed by breakups. There must be severe consequences attached to feeding off the public largesse, or else the moral hazards become nigh infinite.

[unixronin]

I agree entirely. Even if they were going to hand out money, it should not have been done with no strings attached; it should have been stipulated "You are receiving $X billion in emergency funds on the condition that you write off $X billion worth of at-risk mortgages." But if the money was supposed to get them lending and get money flowing again? Yes, absolutely, just cut out the middleman. Everyone with three working brain cells to rub together knew the banks were going to just pocket it ... everyone EXCEPT Congress and the White House, that is. (And I more than half suspect that Congress knew it too, but expected to get away with lining its friends' pockets yet again.)

Sometimes I think we have just as much a kleptocracy as any African failed state. We're just better at observing the social niceties of it.

[ithildae]

TARP, as originally conceived, could have been useful. If an institution is too big, it is too big. The huge problem with TARP was that it was shoved down ALL the bank's balance sheets, then the political whiplash created all manner of braided "strings" that became attached to those funds. The conditions, disclosed after the money was forced on the banks were too toxic to do business under, so even the banks that truly needed the funding to remain solvent sent the money back as fast as they were allowed. Totally destroying the purpose of the relief in the first place.

Much as I dislike the magnitude of the finance industry compensation, the structure of the money (very low salary, so you can eat Ramen and Peanut butter) with the majority of your salary delivered when profits are calculated. That is in the employment contract, including what the person needs to do to earn that part of their negotiated salary. Bonus is a stupid term, stemming from the tax implications of paying the money out, so the government tax laws force the banks to use the word bonus. It is NOT a bonus, it is part of their contracted compensation package that is conditional on their performance. You share the risk of being able to do well, so your rewards are going to be greater, if you pull it off.

[perspicuity.livejournal.com]

moonshine justice :)

#

[smandal.livejournal.com]

No news here. By propping up misbehaving institutions, you reward misbehaving institutions for their behavior.

The primary aim was to prevent a financial calamity in the present, and in that aim it was probably successful.

[skellington.livejournal.com]

Of course the right answer was to "fail" the banks, have the FDIC take them into receivership, and let the sane and successful banks thrive.

[lebo-superman.livejournal.com]

I agree with smandal and skellington on this one. The best long-term answer to the problem would have been to let them fail.

[unixronin.livejournal.com]

I concur. No private venture is "too big to be allowed to fail". To bail them out, especially for a catastrophic fuckup of this magnitude, only rewards failure, turns it into a success on paper, and encourages them to take even more insane risks (mostly with other people's money, let's not forget) the next time around.

[randwolf.livejournal.com]

See also Johnson & Kwak (http://baselinescenario.com/).

TARP was an appalling giveaway to the banks, but the economists who were right all along (and that's none of the conservatives) keep saying it did stop a 1929-style meltdown. So it wasn't a complete loss. But it sure wasn't a win. In my Depression parallels model, I figure it's about 1930 or so. The big money and authoritarians who dominate the Senate are getting nervous, but aren't nervous enough yet to fix anyone's problems except for those of rich people.

And China is the wildcard.

[unixronin.livejournal.com]

but the economists who were right all along (and that's none of the conservatives) keep saying it did stop a 1929-style meltdown.

I'm unconvinced it has. There is as yet no evidence it hasn't merely pushed it off a year or two. In the words of the SIGTARP report,

"[...] even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car."

[randwolf.livejournal.com]

On the other hand, we have yet to go over the cliff, so it has bought some time. 1932 was one of the ugliest years in US history--in world history--and 2012 promises to be another. There are few reformers with substantial influence on the national scene. The people who know best--who know anything--are still far from the centers of power. Demagogues, on the other hand, we have in spades. There is little will for the kind of regulatory changes that are required, and the Roberts Court is likely to interfere with any attempts. Republicans are so far unwilling to participate in the steps that would avoid a global financial disaster. With the Democrats split and the Obama administration unwilling to take sides, it is difficult to see how progress would be made. I suppose eventually matters will come to the point where, finally, the only thing to do is fix the problems, but we are not there yet, getting to that point is likely to be painful, and I still don't see who would actually do the work.

... President Franken? "Live, from Washington, it's--?" Well, we always said US politics was a clown show.

[unixronin.livejournal.com]

Republicans are so far unwilling to participate in the steps that would avoid a global financial disaster.

Both parties are, I think. Their answer to the problem is, largely, more of what caused it.

I think the truth of the matter is that neither the Republican nor the Democratic arty is actually viable any more. They're both just coasting on pure inertia, straight for a wall they can't even see because their ideology doesn't permit it. IMHO, the sooner they hit it and finally crash, the better.

Remember Wavy Gravy's campaign in Berkeley — "Why not vote for a REAL clown for a change!"

[randwolf.livejournal.com]

Things are not so bad in the House. In the Senate, though, custom and popular panic has led to a dominance of corrupt and reactionary elements. Even so, I'd say that without the deadlock the Senate has arrived at, we might find many of the Senators are at least capable of change.

Historically, collapses of political systems are usually followed by tyrannical interregnums. I therefore don't wish for collapse. On the other hand, perhaps we are now in such an interregnum. In that case, the question becomes how to find the path out.

I'd forgotten Wavy Gravy's campaign!

[echristo.livejournal.com]

You've made an almost willful misreading of the executive summary there. It states that if reform isn't acted then we're merely treating the symptoms instead of the root cause. We most assuredly need reform in this area, but you can't have it both ways; if the wheels had completely fallen off then there would be nothing to reform. In addition it quite clearly states that some of the goals have been met.

Not that there aren't problems, I don't think anyone is happy with the current state.