The Treasury has been spinning TARP as a victory in the months leading up to midterm elections. I have a lot of respect for Elizabeth Warren (former Chair of the Congressional Oversight Panel for TARP, currently helping in the early work for the Consumer Finance Protection Agency she promoted) and the work she has done on bankruptcy.
As John Maggs reports in Politico, it appears that Elizabeth Warren is not too cheery on TARP’s performance.
“The rescue of AIG continues to have a poisonous effect on the marketplace,” said one critic recently. “By providing a complete rescue that called for no shared sacrifice on the part of AIG and its creditors, the government fundamentally changed the rules of the game on Wall Street. As long as the biggest companies in America believe that you and I will bail them out, the worst effects of the AIG rescue will linger.”
The critic was not a Republican politician or some conservative think tank. It was Elizabeth Warren, President Barack Obama’s choice to set up a new agency that will protect consumers from financial system abuses, and her blunt assessment is shared, to some extent, by critics on the left and the right.
Of course, Warren is correct, particularly in her observation: “The greatest consequence of TARP may be that the government has lost some of its ability to respond to future crises.”