Blog Archives
Today in History: TARP
Two years ago today, the first bailout, TARP was passed in Congress and President George W. Bush signed it into law. (Even more ironic, this was also the two-year anniversary of John McCain’s campaign defeat, as he decided to suspend campaign operations to vote for this disaster.) Many of the TARP supporters claim that this was the only way to prevent a total economic collapse at a lower cost to the taxpayers. Of course, without passing TARP, many were saying that we were headed into a second Great Depression.
Fast forward to 2010, since TARP was enacted and many of the banks were bailed out, the government continued this trend by bailing out other failing industries, such as the auto manufacturers in Detroit. If anything, TARP paved the way for failing industries to receive money from the government to help them stay alive. Unfortunately with the passage of TARP, there will be more negative ramifications from this bill.
The Congressional Oversight Panel said, “The greatest consequence of the TARP may be that the government has lost some of its ability to respond to financial crises.”
The program also helped politicize the Fed, putting it in Congress’s crosshairs for its willingness to work alongside the Treasury Department to aid Wall Street. It spawned deep distrust on Capitol Hill, threatening Fed Chairman Ben Bernanke’s nomination and prompting Congress to curtail some of the Fed’s autonomy and authority. The central bank is now subject to broader oversight than it was before and is limited in its ability to single out individual institutions for financial rescues.
TARP may have saved America in 2008. This does not mean that TARP or any other bailout program will work in the future. Perhaps, it is time to remember free market economics before bailing out failing businesses and other entities in the future.
Government, Inc. Leads to Red Ink for Our Nation’s Small Businesses
Guest Post by Congressman Bob Goodlatte
Four years ago, the U.S. Supreme Court handed down its decision in the now-notorious case of Kelo v. City of New London, which authorized the government to take private property from individuals for nearly any reason under the guise of eminent domain, even to give to other private individuals or entities. The public outcry over this decision was so great that it forced states to enact laws to significantly rein in their own eminent domain powers.
Unfortunately, House Democrats did not learn the lessons of the Kelo decision. A few weeks ago, they passed H.R. 4173, the so-called “Wall Street Reform and Consumer Protection Act.” This bill would allow a team of federal bureaucrats to decide that a private business poses a risk to the economy. Incredibly, the bill then allows the federal government to take over that private business and even gives the government the right to sell off the business’ assets. What’s worse, to pay for these takeovers, the bill sets up a permanent $150 billion slush fund.
While the alleged purpose of this bill is to prevent a concentration of money and power in a small number of large corporations, the bill would have the opposite effect. Knowing that the federal government will swoop in and take over any companies that it deems “too big to fail,” creditors and investors will be drawn to lend money to the largest corporations because of the implied guarantee that the federal government will step in to repay these loans. The flow of capital will thus go to the largest corporations rather than where the money is really needed – small businesses and entrepreneurs, which are the true innovators and job creators of the U.S. economy.
The bill also creates a separate, new bureaucratic agency and bestows upon it broad authority to impose burdensome regulations on any business that lends money, extends credit or enters into repayment plans with consumers. These regulations would hit everyone from doctors and hospitals to furniture and department stores.
It is efforts like H.R. 4173 that prompted Ronald Reagan to warn us against those who would have us believe that a small intellectual elite can manage the people better than the people can manage themselves.
For all of these reasons I have cosponsored H.J.Res. 57, a Constitutional amendment prohibiting the United States government from owning or having any interest in any private company or corporation. This bill will prevent future taxpayer-funded bailouts of private corporations and help get government out of the way so that small businesses and entrepreneurs can access capital to innovate and create the jobs that are so desperately needed today.
In this case, as in so many others, government is not the answer, government is the problem. To contact me about this or any other matter, please visit my website at www.goodlatte.house.gov.
