Perspectives on TARP
TARP has had benefits. It's more compelling to focus on the excesses and problems, which are real and have been discussed periodically here, than to focus on the positives. Those positives are:
---Despite there being better alternatives, the eventual TARP was essential. It was absolutely necessary for the United States to do something, almost anything short of an American Idol competition for bank CEO's, to build confidence in the global financial system. The dollar is a crucial benchmark for many economies, holdings of dollars(real or counterfeit) are ubiquituous anywhere beyond the G-7, the core of financial markets operating systems resides in the United States and secondarily in London, and U.S. securities are the most widely held. TARP, however flawed and neutered by Congress, was a godsend for the global economy at the time.
---No other nation or coalition had the will or capability to act. If one thinks that the U.S. has bureaucratic paralysis, try the E.U. If you want lack of cohesion take a look at China, Japan, and the ASEAN. Want chaos, corruption, and dynastic arrogance, move longitudinally down the globe from Russia, over the Caucasus, east to the Steppes and into the Middle East. There was only the U.S. that could staunch the crisis at the time. In not so many years maybe China or a revitalized E.U. could have stepped up, but not now.
---The outrage inflamed by the politicians and the media over the implementation of TARP has been a comeuppance for the financial companies, and one that was for the most part deserved. The challenge now is to both make sure that the message has been internalized and to be certain that the anger is not continued as destructive vengeance.
---The financial system is in better shape today than it was before TARP and before FED monetary infusions into the the markets system. With TALF as well, the overall effort has been massive and the eventual impact is open to interpretation. Not all scenarios are attractive. Nevertheless, in a global economy linked by technology and communications systems that are for the most part a mere 30 years old at best, there was no choice but to take the risk of action.
More comprehensive regulation and vigilant oversight needs to be put in place. This should be focused not only on major financial companies. The achilles heel of everything that is going on now is the lack of focus on the traders, often based at major hedge funds but also independents, who almost openly manipulate markets. That and of course, a favorite here, the analysis and action that needs to be taken on gaps in regulation that allow this manipulation to take place.
---Despite there being better alternatives, the eventual TARP was essential. It was absolutely necessary for the United States to do something, almost anything short of an American Idol competition for bank CEO's, to build confidence in the global financial system. The dollar is a crucial benchmark for many economies, holdings of dollars(real or counterfeit) are ubiquituous anywhere beyond the G-7, the core of financial markets operating systems resides in the United States and secondarily in London, and U.S. securities are the most widely held. TARP, however flawed and neutered by Congress, was a godsend for the global economy at the time.
---No other nation or coalition had the will or capability to act. If one thinks that the U.S. has bureaucratic paralysis, try the E.U. If you want lack of cohesion take a look at China, Japan, and the ASEAN. Want chaos, corruption, and dynastic arrogance, move longitudinally down the globe from Russia, over the Caucasus, east to the Steppes and into the Middle East. There was only the U.S. that could staunch the crisis at the time. In not so many years maybe China or a revitalized E.U. could have stepped up, but not now.
---The outrage inflamed by the politicians and the media over the implementation of TARP has been a comeuppance for the financial companies, and one that was for the most part deserved. The challenge now is to both make sure that the message has been internalized and to be certain that the anger is not continued as destructive vengeance.
---The financial system is in better shape today than it was before TARP and before FED monetary infusions into the the markets system. With TALF as well, the overall effort has been massive and the eventual impact is open to interpretation. Not all scenarios are attractive. Nevertheless, in a global economy linked by technology and communications systems that are for the most part a mere 30 years old at best, there was no choice but to take the risk of action.
More comprehensive regulation and vigilant oversight needs to be put in place. This should be focused not only on major financial companies. The achilles heel of everything that is going on now is the lack of focus on the traders, often based at major hedge funds but also independents, who almost openly manipulate markets. That and of course, a favorite here, the analysis and action that needs to be taken on gaps in regulation that allow this manipulation to take place.
posted by John Borden at 3:37 PM
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