The vote in 2008 to bail out Wall Street was framed as the only way to avert an economic meltdown and relieve financial institutions of their most poisonous holdings. For many members of Congress, it turns out that the vote itself was toxic.The TARP vote was probably a tough one for many in Congress, but overall it was not a bad investment. In many cases the US actually made money on the loans and stock they acquired for doing them.
Nearly two years after Congress approved the Troubled Asset Relief Program, the Bush administration’s $700 billion program to rescue the banking system at a moment when it appeared close to collapse, lawmakers from both parties who backed it remain haunted by the vote.
Republicans for months predicted that a backlash against the Democrats’ big health care law would be the defining issue in this year’s Congressional campaigns. But the bipartisan TARP vote has become a more resonant issue in a year when anti-incumbent, anti-Washington sentiment is running strong.
Democrats who voted for the bailout — which was championed by their own leaders along with President George W. Bush and Senator John McCain of Arizona, then the Republican presidential nominee — are now facing attacks from Republican challengers on the campaign trail. Republicans who voted for it are being accused of promoting big government and fiscal irresponsibility by Tea Party candidates and other conservatives.
Emotions can run high over the subject. Lawmakers report being buttonholed over bailouts by confrontational constituents, and Senator Robert F. Bennett, Republican of Utah, was jeered at a party convention by people chanting “TARP, TARP, TARP.”
“It became a litmus test of fidelity to free enterprise principles,” said Representative Bob Inglis, a South Carolina Republican who was crushed in a primary last month partly because of his vote in favor of the plan.
While banks have paid back most of the money, and the bailout is widely credited with having helped to prevent a financial calamity, support for it has become among the biggest issues in the 2010 midterm elections, a powerful if simplistic way to attack what some see as government excess, misplaced priorities and a loss of trust between voters and elected officials.
In Texas, Representative Chet Edwards, a 10-term Democrat, is facing a stiff challenge by Bill Flores, the former chief executive of an oil and gas company, who has assailed Mr. Edwards for his support of the bailout and also the continuing taxpayer subsidies for the mortgage giants Fannie Mae and Freddie Mac.
The support for Fannie and Freddie is another matter. It should have been based on fundamental reform and reining in their ability to buy liar loans and other bad paper. Instead Democrats are still pushing the purchase of irresponsible loans to people who cannot afford them. It was the mismanagement of Fannie and Freddie in support of the irresponsible loans that Democrats pushed that caused the financial crisis to begin with. Their bad paper was monetized and tainted numerous derivatives they wormed their way into causing the credit market to seize up.
The other thing Democrats are doing that give the TARP program a bad name is attempting to reuse the payback money for other bailouts. The deal was sold to Congress and the voters on the basis of a short term fix which was going to result in a profit for the government. Then Obama starts trying to reuse the money paid back making it look like one of his slush funds.
BTW, the Democrats' health care monstrosity is what is killing them in the polls. Even though Chet Edwards wound up voting against the bill, his votes for Nancy Pelosi who pushed it haunt his campaign.