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Matt Taibbi’s big con

Matt Taibbi is so good at whipping up indignation about the evil bankers that it’s easy to overlook the crackpot and diversionary nature of the story he is telling. It would be useful if there was public pressure, for example, to provide a postal bank that would give people an alternative to commercial banks or if the government made low cost loans available to businesses or municipalities (instead of just to banks) so that Wall Street’s casino investment mentality could not cripple the economy. Tax policy that rewarded long term investment and penalized gambling with other people’s money would also be useful. But Taibbi and others have displaced discussions of such options with confused and misdirected anger. For example, once he has developed the narrative a bit in his latest, he offers up the following absurd line:

Republican senators David Vitter of Louisiana and James Inhofe of Oklahoma were so mad about the unilateral changes and lack of oversight that they sponsored a bill in January 2009 to cancel the remaining $350 billion of TARP.

David Vitter and James Inhofe, two of the worst, most despicable, most irresponsible Senators in the history of the United States were -  get this -“mad about … lack of oversight” in TARP.  And because of this sudden rush of integrity and public spirit, not because they were unprincipled partisan hacks angry that  Barack Obama was taking office a week later, they tried to shut off the money spigots after Paulson and G. W. Bush had already handed out $300 billion to Wall Street. That’s what Taibbi wants you to believe. On second thought, “crackpot” is too polite.
The Vitter/Inhofe resolution was also sponsored by  Bunning, Sessions, DeMint, Barrasso, Enzi and Brownback- an all star cast of terrible Senators.  And Taibbi pivots from the righteous indignation of Diaper Dave Vitter  to the fulminations of Neil Barofsky, the guy GW Bush appointed as TARP Inspector General and whose complaints Taibbi takes as unquestionable truth.  Mr. Barofsky, it turns out, was also a big fan of GOP politicians.
For instance, like so many actors in the capital, Mr. Barofsky develops backdoor relationships with the offices of friendly Republican lawmakers like Senator Charles E. Grassley of Iowa and Representative Darrell Issa of California, leaking information back and forth to shape news coverage. Then he wonders why Treasury keeps him in the dark? [NYT]
Issa and Grassley - nearly at the same level of moral integrity and public service as Vitter. But here’s something just as important that Taibbi does not say: the failure of that Vitter/Inhofe resolution is what allowed President Obama and Treasury Secretary Geithner to rescue the auto industry with TARP funds. In fact, the auto rescue, by far the biggest use of TARP funds by Obama’s Administration is never  mentioned in Taibbi’s article.  Never mentioned- like it didn’t happen. Of course the Treasury under Tim Geithner did not just rescue the auto industry, it rescued the credit unions, provided billions of dollars of TARP loans to small banks, including labor union owned banks, and retrieved almost all the money Bush and Paulson had given to the big Wall Street banks.  Taibbi makes strenuous efforts to dance around the last part - in fact he implies the opposite.
And lastly, he [Larry Summers] promised that the bailouts would be temporary – with a “plan for exit of government intervention” implemented “as quickly as possible.”

The reassurances worked. Once again, TARP survived in Congress – and once again, the bailouts were greenlighted with the aid of Democrats who fell for the old “it’ll help ordinary people” sales pitch. [..]

But in the end, almost nothing Summers promised actually materialized.


But in fact, with one exception everything Summers promised did materialize - especially the exit. Almost all of the money that Bush and Paulson gave to Wall Street came back to the public under Obama and Geithner. To avoid the problem this fact presents for his story, Taibbi uses a lot of invective:
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed.
Actually, the government never committed more than $450billion, but what’s an additional $250billion when it gets in the way of a good story? Or how’s this on Larry Summers?
The pudgy, stubby­ fingered former World Bank economist, who had been forced out as Harvard president for suggesting that women lack a natural aptitude for math and science, begged legislators to reject Vitter’s bill and leave TARP alone.
My GOODNESS - the man is stubby fingered!  No wonder paragon of virtue, Dave Vitter hated him. When invective doesn’t get the job done, Taibbi tries pure bluff.
The bailout ended up being much bigger than anyone expected, expanded far beyond TARP to include more obscure (and in some cases far larger) programs with names like TALF, TAF, PPIP and TLGP

Ominous - but only if you don’t know anything about these programs. TALF has almost all been paid back with interest - about $800million in loans remain outstanding and are all current (they are being paid on time). All TAF loans were repaid in full with interest.  PPIP has earned billions in profits for the government.   TGLP expired with no public losses. Treasury now estimates that total government costs for TARP will be about $80billion - far less than the Resolution Trust cost to wind up a much smaller Savings and Loan crisis in the 1980s. And most of that projected loss is for the auto bailout and writing down people’s mortgages. For Obama and Geithner to get us to this state from the shambles Bush and Paulson left is truly an amazing accomplishment.
See also: Can-matt-taibbi-really-be-that-naive