June 28 (Bloomberg) -- The $700 billion bank-rescue program designed to avert an economic collapse has proved a political liability to some Republican lawmakers in primary races.
Amid voter concern over rising government debt and spending, the lawmakers are facing criticism they strayed from fiscal conservative principles by backing the Troubled Asset Relied Program in 2008.
Two lawmakers in Republican-leaning South Carolina who lost primaries last week -- Representative Bob Inglis and Gresham Barrett -- were dogged by their votes for the bailout, which was backed by then-President George W. Bush, a Republican. Other Republicans fending off attacks from within the party over their support of the measure include Senator John McCain of Arizona.
“It’s become a lightning rod for voters,” said Karlyn Bowman, who studies public opinion at the American Enterprise Institute in Washington.
While the public supported the plan during the economic crisis in the last quarter of 2008, there was a “stark turning against” it as the funds continued to be released, she said.
Senator Bob Bennett, a Utah Republican whose re-nomination bid was rejected by a state party convention in May, said he has no regrets about supporting the rescue bill, even though it helped derail his try for a fourth term.
“If I had to do it again knowing it would end my career, I would still” back it, Bennett said in an interview. “It was the right vote.”
The legislation, crafted by leaders from both parties and top officials in the Bush administration, was backed by 91 Republicans out of 199 then in the House and, in the Senate, by 34 out of 49.
Republicans would have been worse off if they had unified in opposing the bailout, said David Woodard, a political scientist at Clemson University in South Carolina.
Such a move would have put the party “in the wilderness” for decades, facing political challenges similar to those Republicans confronted after President Herbert Hoover’s administration failed to stave off the Great Depression, Woodard said.
Still, the passage of the TARP bill has become part of the assault on Republican incumbents by fiscally conservative challengers, who link it to the economic stimulus package passed in 2009 and health-care legislation approved this year as examples of federal overreach.
“They forget how scary it was because time’s passed,” said Representative Gary Miller, a California Republican who won a four-candidate June 8 primary with 49 percent of the vote. “I tried to do what I thought was right and I got beat up pretty good for it.”
In South Carolina, the House vote Barrett cast for the TARP bill hindered his unsuccessful campaign for governor. He lost the Republican nomination to Nikki Haley, who had backing from Tea Party activists who favor limited government, in a June 22 runoff.
Inglis found voters in his district troubled by his support for the TARP bill. He lost his re-nomination bid in the runoff to county prosecutor Trey Gowdy, who accused Inglis of breaking with party principles in backing the measure.
In Texas, Governor Rick Perry nicknamed Senator Kay Bailey Hutchinson, his opponent in the state’s March 2 Republican gubernatorial primary, “Kay Bailout Hutchison” because of her vote for the TARP bill. Perry beat Hutchinson by 21 percentage points.
McCain, a four-term incumbent, suspended his Republican presidential campaign in September 2008 to travel to Washington to help craft the TARP bill. He now says he was misled by Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson about how the funds would be used, as he fights attacks over the measure from his primary opponent, former Representative J.D. Hayworth.
The Treasury has disbursed $386 billion of the $700 billion authorized for TARP, and $194 billion of it has been repaid, Treasury Secretary Tim Geithner said at a June 22 congressional hearing. The program’s ultimate cost to the government will be $105 billion by Geithner’s latest estimate, down from a $341 billion estimate in August.
Companies including Goldman Sachs Group Inc. and Bank of America Corp. that took funds have since repaid the money.
The first $350 billion authorized by the bill was used to shore up struggling financial services companies, including American International Group Inc., as well as General Motors Co. and Chrysler Group LLC. Congress authorized release of the second half of the funds in January 2009 after President Barack Obama pledged to spend $100 billion of the money on a foreclosure-prevention effort. Only six Senate Republicans supported the second authorization.
Senator Richard Burr, a North Carolina Republican, said voters don’t distinguish between the program’s two phases. “The initial one was to shore up the architecture,” said Burr. “The second was to do the bailouts.”
Miller said the TARP issue was difficult to explain in a political advertisement. “I’m a hardcore conservative but I’m a realist,” he said. “I couldn’t explain that on TV in a matter of 30 seconds.”
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