24
Frum: Banks are OK, but who cares?
Commentator David Frum.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF COMMENTARY
[CORRECTION 9/16/10: David Frum's commentary about voters blaming President Obama and other politicians for a bank bailout that he believes saved the financial system omitted when the TARP lending program to banks began. It began before President Obama took office and has continued under his administration.]
Kai Ryssdal: With the primaries last night, we are now basically set for the fall elections. We know who's going to be running against whom. And we know what we're in for: Weeks of campaign ads about the direction of the country, how to bring back jobs and what to do to fix the economy.
Commentator David Frum has some observations about that intersection of politics and the economy.
David Frum: In the first days of the Obama Administration, early in 2009, an important decision had to be made. America's banks had racked up $1.5 trillion in losses during the financial crises -- more than their combined total capital. The banks were bankrupt.
Some economists argued that the best choice was to follow the example of Sweden in the 1990s: The government should nationalize all the banks, sift through the wreckage, transfer bad assets to a single government-owned "bad bank," and then return the cleaned-up banks to private ownership.
This option was shot down by Treasury Secretary Tim Geithner and economic adviser Larry Summers. They advocated government help to recapitalize the banks without taking them into government ownership. And that is what happened.
The private banking sector has now recovered its profitability. It is rebuilding its reserves, and the banks have repaid most of the TARP loans they received from the government.
Everybody happy? Far from it. The TARP bailout may have averted a global depression, but it violated just about every idea of fair play. Voters don't care that things might have been worse; you get no marks in politics for beating the spread. Dissatisfied voters seem almost certain to administer severe punishment to the administration in November.
Bailouts have become poison for Republicans too. In Utah, Republican Senator Bob Bennett lost his party's nomination in large part because of his vote for the TARP bailout.
You can save the world -- but still lose your job.
Politicians will learn different lessons from this story. Some will learn: Don't stick your neck out for anybody. But there's another possible lesson too: We're all headed to retirement sooner or later, whether we like it or not. It's not a bad thing to be able to tell your fellow retirees that you did something big and important during your time on the job.
Ryssdal: David Frum spent time writing speeches for President George W. Bush. He's now the editor of Frum Forum. Next week in the rotation, Robert Reich is back.
Pages
Simply, I am surprised that voters did not take their anger out on Wall Street and demand those who caused this fleecing be sent to prison. Better yet, Gitmo for economic sabotage. That may not fix the budget, but the psychological boost would install faith back into the economy since Wall Street Banker is synonymous with the word Pariah.
I disagree with what Frum is saying. I don't think the Federal Government saved the banking system. I think they simply postponed the day of reckoning with lots of borrowing and money printing. Home foreclosures continue to climb and too-small-to-save banks continue to fail. The FDIC is operating in the red. It's like pressure building inside a nuclear reactor that the "experts" dismiss as unimportant until there is a disaster.
I suppose I shouldn't be surprised, but this "correction" is as disingenuous as it could possibly be, and you should be ashamed. Frum's original commentary did not "omit" when the TARP bailout was passed. Frum intentionally lied about when it was passed. He specifically stated that it passed in the first months of the Obama administration. The piece still misstates the facts when it says, "This option was shot down by Treasury Secretary Tim Geithner and economic adviser Larry Summers. They advocated government help to recapitalize the banks without taking them into government ownership. And that is what happened." Geithner was President of the New York Fed, not Treasury Secretary, when this happened, and Summers was an advisor to the President-elect at the time, with no real power.
Frum's purpose in writing this commentary was obviously to perpetuate the myth that the Obama administration was responsible for passing the TARP legislation. This is a partisan political attack based on a lie, not serious commentary, and you at Marketplace need to do better.
The American people deserve a bailout not the greedy banks. Politicians only look out for their best interest not the people. This money can be used for families to help pay off their debt instead of increasing it. So when election times come don't believe their empty promises about helping you they will only help those who help them. The rich getting richer and the poorer getting poorer.
Yeah...I was also annoyed as I listened to David Frum's commentary because he suggested TARP began under President Obama. MarketPlace needs to do a better job of checking out the claims in these commentaries before playing them on the air.
As angry as I was at hearing Frum lie like a dog, I am glad you corrected his lie. BUT, perhaps you should vet future commentary from so biased a source.
Also, it did my heart good to see how many responses his re-write of history brought out.
I am glad you made the correction, but this never should have happened in the first place. Frum and his ilk know very well it is a good strategy to put BS out there, because eventually it will stick. This is what they did with climate change. I am really disappointed in NPR, and will remember this come pledge season.
Please see this correction, now posted above the commentary:
CORRECTION: David Frum’s commentary about voters blaming President Obama and other politicians for a bank bailout that he believes saved the financial system omitted when the TARP lending program to banks began. It began before President Obama took office and has continued under his administration.
Marketplace
To David Rigby, To say the banks are "saved" and hoorah for us all is also an unproven opinion. This is NOT over. No one has ever proved that letting them fail was the WRONG way to go. All we have is opinion and conjecture. The whole of TARP was a gigantic violation of the notion of capitalism. Allowing failure is a virtue. Not allowing it to happen means we must now live with an idiotic precedent forever. No one here has a right to be happy about this and claim themselves heroes. -rufus
To all you who are implying that Frum suggests that Obama is responsible for TARP are missing the point. Yes the programme came into play under Bush, and certainly Frum knows this. Frum's point is that many of the major decisions were made under Obama and Obama's administration got it right.
Pages
