The Real Impact of TARP

In this excellent WSJ piece by Atkins, McWatters and Troske, TARP is revealed as a shell game of numbers. All this goes to suggest that government bailouts should never be sold as good for the taxpayers on the strength of their economic benefits.  It is misleading.  Bailouts are costly and never economically efficient.  The only efficient, albeit cold, solution is for the market to sort out the winners and losers.  Bailouts should be recognized for what they are - programs to a. reduce the impact of a system in discontinuous change on social welfare, and/or b. to protect a political obligation resulting from earlier deals made to facilitate some type of social program (i.e., payback).  In the case of TARP and related bailout measures, the government and Congress are paying back the banks for facilitating the Community Reinvestment Act and other programs to put more voters in homes and/or finance their lavish lifestyles.