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Comment by fleitz | Hacker News Reader

"Congress has an obligation to ensure that effective solutions are implemented and taxpayers don't get stuck paying for a bailout," I wonder where Issa was when bailing out the banks for $2 trillion.

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The bank bailouts appear to be widely unpopular. I can only guess this is because people don't truly grasp what was happening, or what the alternative would have been. My congressman was one who initially voted against TARP, and I communicated to him that he needed to change his vote. Like most politicians he is not an expert in economics or finance, and he didn't take kindly to what was essentially the Bush administration "telling us the sky was falling, and putting a gun to our heads." But the sky was falling. The economy was in a free fall with millions of jobs being lost monthly, the stock market tanking, and credit markets -- a crucial cog in our economy -- freezing up. If congress had not acted the financial system would have collapsed. We would now be in a real depression. Imagine how bad people say the economy is now, and multiply that by about 100. I'm talking millions unemployed, homeless, tent cities, crime, and a feeling of hopelessness pretty much everywhere. That would have been the alternative to not bailing out the banks. In that context I don't think many would oppose the bailouts.

Now, was the system set up incorrectly where we could end up in such a mess? Yes. But that wasn't the fault of any one politician or group of politicians at any one time. The problems leading up to the crisis built up in different ways over time. The financial reform President Obama has pushed through addresses some of these issues, for example, by allowing the government the power to break apart and unwind large "too big to fail" type entities without bailing them out with taxpayer funds. When you look at it this way, Congress and both the outgoing and incoming administrations did do what was best for the country, even if unpopular on the surface. This doesn't even get into the fact that a lot of that initial money has been, and continues to be paid back, and in some cases even turns a profit.

I think there's a bit of FUD in your statements. I also believe that those who supported the bailout are the same who stood to lose the most i.e. the wealthy. I believe that the bailouts will only further encourage the same behavior and prolong the inevitable.

If the worst-case, or even most-likely scenarios had llayed out then the wealthy would have lost a lot and the poor and middle-class would have lost everything.

I don't think the government should have sat back and done nothing but the bailouts were not the right solution. I would have much preferred that they assisted in managing the bankruptcies than preventing/delaying them by throwing money at them. They should be breaking up all those mega-corps like Freddie Mac, Fannie Mae, and AIG, instead the same companies that got us into this mess are still around and as big as ever.

I'm not sure I buy the catastrophic collapse argument - it's an easy one to make. "Oh man, things would have been a lot worse if we hadn't done all that stuff we did."

Well, maybe.

But let's just say it's true for now. Even if that's the case, those organizations could have been liquidated and their assets sold off, perhaps with the key pieces under some sort of guarantee from the Federal Reserve or Treasury or "Bureau of Stabilizing Home Interest and Trust" or whatever feel-good label/acronym these messes are typically labeled.

The organizations that made bad bets should've been liquidated, even if you believe the catastrophe scenario (which I'm skeptical of personally).

Bureau of SHIT ( Stabilizing Home Interest and Trust)?

The taxpayer could have gotten a lot more for our money. The bailed out banks' should have been nationalized, recapitalized then sold off.

Issa voted against TARP

http://clerk.house.gov/evs/2008/roll681.xml

Only because it was clear enough people were voting for it that he could pretend to stick to his principles. You think if it came down to him, he'd actually vote for total financial collapse?

Wrong. He also voted against it the first time in the House, when the bill did go down and the Dow dropped 700 points.

Plus, the "total collapse" argument was BS. We'd be further along if the feds had allowed the banks to fail (while protecting individual depositors) and reorganized them. We did it this way with the RTC in the 1980s and Sweden did it in the 1990s.

Eh, maybe, although I kinda doubt it, there's an assumption to think that because we didn't have a collapse, there was no danger of one. Vanishing 1/3 of the banking industry overnight without an organized wind-down would likely have led to disaster even in retrospect.

In the moment? Anyone who voted against that bill was either posturing or a madman. I mean, we got the money back anyways, most of it. Why play chicken?

People arguing that there wouldn't have been a collapse reminds me of people who think the Y2K problem was a myth created by the software industry to drum up some jobs.

Well, something like 30% of the country still believed Saddam had WMDs in like 2006, and 25% of the country thinks Obama wasn't born in the US right now. Those are different than having a non-mainstream opinion on a hypothetical, but goes to show, people can believe whatever they want.

Plus, the "total collapse" argument was BS.

Wrong, and many well respected economists will tell you you're wrong.

Sources?

I'd appreciate a citation to back up your claims. I'm pretty sure I could also find plenty of economists on the other side as well.

Here you go...

Economists agree: Legislation Reid led to passage prevented economic collapse

Excerpts:

Krugman: Government intervention helped avert "second Great Depression." In his August 9, 2009, New York Times column, Nobel laureate Paul Krugman wrote that governmental actions kept the U.S. from going into "a second Great Depression"

...

Blinder and Zandi: Policies "probably averted what could have been called Great Depression 2.0." In July, former Federal Reserve vice chairman Alan Blinder and Moody's Analytics chief economist Mark Zandi issued a report citing analytic models to demonstrate that the "multifaceted and bipartisan" response to the financial crisis, including the Troubled Asset Relief Program and the American Recovery and Reinvestment Act - both of which passed the Senate under Reid's leadership -- had a "huge" effect on real GDP, jobs, and inflation, and "probably averted what could have been called Great Depression 2.0"

...

U.S. Chamber president: Stimulus needed because "we thought we were days away from a global recession."

...

AEI's Malkin: Policy response "averted" global depression. From a January outlook report by the American Enterprise Institute's John H. Malkin

...

Nowakowski: Policies have "averted depression." In a September 13 column, David Nowakowski, director of credit strategy at Roubini Global Economics, wrote that the Federal Reserve's fiscal policies, "along with the fiscal stimulus," have "averted depression, reversed a short bout of deflation, and helped unemployment from reaching 1930's levels."

...

Romer: Policies made difference between recovery and "second Great Depression." In her September 1 farewell speech, Christina Romer, outgoing chairman of President Obama's Council of Economic Advisers, praised the stimulus package and the Obama administration's use of TARP funds and said: "I am proud of the recovery actions we have taken. I believe they have made the difference between a second Great Depression and a slow but genuine recovery.

http://mediamatters.org/research/201010220033

Dude, mediamatters.com's tagline is "Help us fight conservative misinformation" - that's not exactly an unbiased source. Or really any sort of respectable source to talk about economics at all. You already know what their position is going to be from the tagline.

The source doesn't matter as I'm providing quotes from a range of well respected economists, including Nobel laureate Paul Krugman, and Christina Romer, former chairman of President Obama's Council of Economic Advisers.

Not to mention quotes from AEI and the president of the Chamber of Commerce, which essentially became a conservative advocacy organization this past election.

Paul Krugman is well respected among one subset of economists and thought of as a total loon by other major subsets of economists.

I don't know much about Christina Romer, but is there any reason to believe she and Krugman constitute a "range" of economists?

More than those two are quoted.

The point is that you can't cite a partisan political site as evidence of a consensus. You already know what their positions are going to be - they're going to reference economists that agree with them (who tend to be affiliated with the Democrats, like Kurgman and Romer) and not economists who disagree with them.

lionhearted, you're missing the point. This is not a partisan issue. Please tell me things are not so divided in this country that people read partisanship into everything, even as far as HN.

T.A.R.P. was started and passed under George W. Bush. The people advising him, including Henry Paulson his Secretary of Treasury, and Federal Reserve Chairman Ben Bernanke were telling him the same thing. See here:

http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

My point in posting here is not about partisanship, but about accuracy. Economics is a science -- not an exact one, but a science nonetheless. At its core economics is not about partisanship at all. People can probably turn anything under the sun partisan, but that's their problem. Believe it or not some people are able to focus on doing their job (and providing their opinion) in the interest of the country above partisanship, like current Secretary of Defense Robert Gates who is a Republican. Economists advising both sides of the aisle support the position I've outlined. I'm not going to to look them up for you, but you can feel free. I'll start you off. Look for the comment near this one by jbooth http://news.ycombinator.com/item?id=1901677.

Wrong, and many well respected economists will tell you you're wrong.

Yes and other well respected economists (at least at the time) told that we were in a "Great Moderation":

http://en.wikipedia.org/wiki/The_Great_Moderation

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