By Marc Seltzer; originally published on December 6, 2009, at care2.com. . .
The good news is that the losses from the government bailout are far less than many feared. The New York Times reported yesterday that the Treasury currently counts losses of only 42 billion dollars out of its several hundred-billion-dollar rescue program.
Of course, 42 billion is still beyond comprehension. It is bad news to lose those public funds, and there are other funds still at risk. Nonetheless, it’s better than the hundreds of billions that were in doubt.
In fact, for those who feel that the government bailed out Wall Street at the expense of Main Street, the facts may prove otherwise. It turns out, for example, that the banks are rapidly repaying much of what was given to them. The financial industry still has TARP funds that may cause public losses over time — no final accounting is available — but the largest share of the current estimated losses, 30 billion, come from the bailout of automobile giants G.M. and Chrysler.
The bailout of the Detroit automobile companies was designed to protect Main Street, not Wall Street. Middle class workers at the big factories and at the auto-parts supplyers would have lost their jobs without government intervention. The U.S. was losing more than 500,000 jobs a month at that point. Adding auto factory closures, that number might have hit a million a month, and who knows what else might have collapsed?
I am still haunted by Thomas Friedman’s New York Times Op-ed saying that giving money to G.M. and Chrysler might stop smaller, greener, entrepreneurial auto innovators from inventing the wonder cars of the future because the competition from a subsidized G.M. was too great to overcome. Be that as it may. Main Street jobs and an entire industry were saved at a point when the economy was very vulnerable.
The bailout of the banks, though ostensibly done to save the financial system, gave the government rescue a bad name as it appeared to protect Wall Street over Main Street. It certainly saved financial industry shareholders and employees from their share of losses. It turned even uglier when it created windfalls in compensation for the already rich. However, if the bulk of the money lost went to saving middle class jobs and helping the car companies retain some value in the bankruptcy reorganization process, we may need to rethink who we say was bailed out and why.
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December 7th, 2009 UPDATE: Food for thought in Newsweek’s take on the jobs data.
December 9th, 2009 UPDATE: A NYT article on the congressionally mandated review of TARP’s effectiveness.