The Tea Party Is Wrong

[caethan]

So, ostensibly, I should be behind the Tea Party movement. I have Republican leanings, I'm strongly conservative, anti-federalist, etc., etc. My general political leanings align with their claimed ideals. So why can't I support them?

It's one issue: TARPThe Tea Party have been systematically driving out TARP supporters from the Republican

Comments

[ferventsquirrel]

TARP may have been necessary to save the financial industry, but there are a number of legitimate reasons to dislike TARP that I think you haven't addressed.

1. The use of TARP funds for the auto-industry bailout. One can argue about whether that industry should or should not have been bailed out, but doing so had nothing to do with saving the financial system. Totally unacceptable.
2. The use of TARP money to rescue banks that didn't need to be rescued. I'm thinking of Wells Fargo in particular (sorry I couldn't find a more detailed link. The intertubes seem to have swallowed the original story). It's one thing to provide emergency financial relief to troubled banks, but quite another to demand banks take loans they don't want and then meddle in their affairs on the grounds that they're TARP beneficiaries. Not acceptable

[caethan]

I'm warning you, I will get pissy if you keep referring to TARP as a "bailout". That falsely implies that either the goal or the effect of TARP was to benefit the banks as such, and neither is the case. In fact, the banks took a bath on TARP (due to their own stupidity), while the Fed stands to make a significant profit off of the assets they picked up. As opposed to, I might note, the Republican plan at the time of selling insurance against those assets, which would have been a bailout of the banks.

And you're mischaracterizing the source of the financial crisis in the first place. The problem --- or at least the problem that led to the crisis --- was not that banks made risky investments that went south, the problem was that banks were holding illiquid assets as if they were liquid

[ferventsquirrel]

the problem was that banks were holding illiquid assets as if they were liquid

Mmm... really? I mean, even if that's true, that just raises a few other questions: Why were the banks holding illiquid assets as if they were liquid? Was it responsible for them to be overleveraged in that way? Can/should they be faulted for that? And if they were at fault, how do we prevent this from happening again?

My understanding is that this wasn't so much due to assets being illiquid as poorly invested. Specifically in the form of home mortgage loans to people at high risk of default. Perhaps I am wrong on this?

Anyway, I'm at work now and really can't be researching the details of this at the moment. But I'm happy to look at any helpful references you wish to provide. Joe, do you want in on this discussion?

[caethan]

Yes, this is all based around these mortgage-backed securities, but not in the way that you seem to think. Things went bad because those mortgages were mispriced, but just mispriced mortgages alone wouldn't have caused the crisis