Senator Mark Begich tries to give his Alaska constituents the good news about the bank bailout.
The Troubled Asset Relief Program will cost far less than government forecasts, he tells voters back home, pointing to estimates indicating the price tag will be 80 percent lower than projected. They aren’t impressed.
“They look at me like, ‘Yeah whatever, it was a bad idea,’” said Begich, a Democrat. “Everyone hates TARP.”
Lawmakers, criticized throughout the election campaign over the 2008 rescue plan that initially set aside $700 billion, are getting no relief even as bank repayments send the projected cost plunging. Voters so oppose the bailout that lawmakers say it may not be worth the effort to change their minds.
“If you ask any pollster they’d say don’t mention” it, said Begich, who is no fan of the program either, having campaigned against it in his 2008 election. “People think TARP is like a plague -- you touch it, you get diseased and you’re dead,” he said. “There is no good news with it.”
A Pew Research Center poll released Oct. 6 showed that 46 percent of respondents would be less likely to vote for a candidate who supported the bailout, while only 13 percent would be more likely.
As a result, TARP has become a potent issue in this year’s elections: Political campaigns have spent $50 million on television advertisements criticizing the bailout, according to Evan Tracey, president of Kantar Media’s CMAG in Arlington, Virginia, which tracks political ads.
Beset With Complaints
Republicans including Senate Minority Leader Mitch McConnell, House Minority Leader John Boehner and Representatives Eric Cantor and Paul Ryan, as well as Democrats such as House Speaker Nancy Pelosi, Majority Leader Steny Hoyer and Senate Majority Leader Harry Reid, voted for the bailout in October 2008, heeding warnings by then-Treasury Secretary Henry Paulson that failure to act could lead to economic turmoil.
Since then, lawmakers have been buffeted by complaints about tax dollars going to firms paying million-dollar bonuses, concern over budget deficits, and voter objections that it was unfair for the government to rescue banks that caused the crisis, which has pushed the jobless rate to almost 10 percent.
The hostility has persisted even as the Congressional Budget Office cut its estimate of the program’s cost three times. As of August, the CBO expects the price tag to total $66 billion, down from the $356 billion it predicted 18 months ago.
The Treasury Department estimated this week that TARP may cost taxpayers as little as $51 billion, less than half what it took to clean up the 1980s savings-and-loan crisis. The cost could shrink to $29 billion if the U.S. reaps expected profits from its other, non-TARP aid to insurer American International Group Inc., it said.
The government profited from interest and dividends paid by banks and by selling warrants -- the right to buy stocks at a fixed price -- that became more valuable as bank shares rebounded from the crisis. The portion of TARP aiding banks will produce a $16 billion profit, the Treasury Department says.
The government also committed just $507 billion, at the program’s peak, of the original $700 billion package, according to the TARP congressional oversight panel.
“If the government could make 20 percent on everything we put money into, we wouldn’t have a deficit,” said Senator Judd Gregg, a New Hampshire Republican who was one of the program’s architects. “TARP’s an easy four-letter word” but “it’s a pretty good deal for American taxpayers.”
The big losers will be aid to automakers and homeowners. The administration estimates the government will recover $65 billion of the $82 billion it put into General Motors Co., Chrysler and others in the industry. A program to help homeowners pay mortgages will cost $46 billion.
The financial returns offer little consolation to Republican incumbents -- including Senator Lisa Murkowski of Alaska, and Representatives Mike Castle of Delaware and Bob Inglis of South Carolina -- who lost primary elections to candidates seizing on public outrage over the program.
The funds are coming back “as I predicted” and “the taxpayer will probably make money,” said Senator Bob Bennett, a Utah Republican dubbed “Bailout Bob” on his way to losing his party’s endorsement in May for a fourth term.
‘Just Doesn’t Matter’
That hasn’t made much difference to many voters.
“This is one of those things the public knows for a ‘fact,’ and it just doesn’t matter what the reality is,” said Doug Elliott, a former JPMorgan Chase & Co. banker and now an economics fellow at the Washington-based Brookings Institution.
TARP critics said even with reduced cost estimates, taxpayers are still on the hook for billions.
“We may not lose as much as we thought,” said Senator Jim DeMint, a South Carolina Republican. Still, “we were told it would make a profit” and “the chances of getting it all back and making money are slim to none.”
That sentiment is so pervasive that Representative James McGovern, a Massachusetts Democrat who backed the bailout, said he won’t spend much time telling voters about the lower estimates.
“Most people have no clue that it’s being paid back,” McGovern said. “In the course of a campaign you focus on a handful of things, and if you have to start explaining things you’re in trouble.”
That 91 House Republicans, including the leadership, backed TARP hasn’t stopped the National Republican Congressional Committee from targeting Democrats for casting the same vote. TARP was approved in the House 263-171, with 172 Democratic votes. It passed the Senate 74-25, with support from 34 Republicans.
Democrats such as Missouri senatorial candidate Robin Carnahan are also blasting opponents for supporting the legislation.
The TARP name has become “like ‘junk bonds’ or ‘subprime lending,’” said Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat. “You say certain words and it’s like Pavlov’s dog -- people just respond to it.”
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