When it passed the TARP Bill authorising the Treasury Department to spend €700 billion to stabilise the US financial sector, Congress set up a Congressional Oversight Panel (COP) to oversee how the TARP money was spent. The COP is chaired by Elizabeth Warren, a law professsor from Harvard and has held regular hearings and issued monthly reports. This month’s report is “Taking Stock: What Has The Troubled Asset Relief Program Achieved?”
I have noted before that even if one sets aside issues relating to fairness and cost to the Irish taxpayer, I don’t believe that NAMA will achieve what the government states is its purpose, namely “getting credit flowing again.”
In this context, it is interesting to see that there is a debate this week in the US, prompted by this government report, which focuses on, among other things, whether TARP increased lending at assisted institutions. Chicago’s Casey Mulligan writes about it here.
The report’s conclusions, on page 30, noted that there were US government officials who had concerns about the health of some of the banks being assisted and that statements that TARP was going to get lending going again created “unrealistic expectations.”
James Kwak of Baseline Scenario responds here that the politicians knew full well that TARP probably wouldn’t increase lending—that it was more an emergency measure to keep the banking system afloat—and that these claims were made simply to obtain the necessary political support for an unpopular measure. Sound familiar?