This got me back on the track of something I've been contemplating for a while. Sorry for being scarce lately, but reality intrudes.
The point that Auerback makes is correct: that TARP didn't address the problems, but rather enabled fraud to be unrolled in its entirety.
This is the core of what is being said:
Calling the TARP a success is like claiming your wastrel son is getting his life together because he's settled his gambling debts, while omitting that you are paying for his apartment, got him an overpaid job at your company, and handing him $100 bills more than occasionally.
...inadequate capital didn't cause the financial crisis. Lying and corruption did.
Congress adopted unprincipled accounting principles that permit banks to lie about asset values in order to hide their massive losses on loans and investments, which allowed them to raise the capital.
The problem is that the policy was not shaped by finance or sound economics, but by politics. Both administrations have sought to keep the American people from knowing about these cover-ups and secret subsidies because they know that we would not tolerate either policy. The cover-ups and secret subsidies are not simply awful financial policies; they are also a betrayal of democracy. And our press has gone from clulessly enabling this treachery to actively promoting it.
This should be sending the American voting population into a collective rage: this goes beyond the usual (largely Democratic) corruption of Congress and is the active defrauding of an entire generation, the generation which has given so richly to the Democrats and their smokescreen of liberalism and "being for the common man".
Nothing could be further from the truth: that is the fundamental of any fraud.
I think you need to consider this: TARP did save the US banking system from collapse, did prevent The Great Depression 2.0, and did prevent an even worse world-wide melt-down that would have seen most of the world's economy collapse.
It did so at the cost of bankrupting US government finances.
Those who were liars and who were corrupting the banking system in the name of profits. In other words, a significant number of folks. All the subprime lenders, all those who aided and abetted them, as well as their political lackeys. All the derivative sellers who were betting on the other side, buying insurance on their neighbors' houses while selling gasoline and matches to known pyromaniacs (and making it clear which houses weren't to be burned down).
If you look at the real, underlying economy, ignoring the feel-good numbers, you can see that the real economy is in a depression: employment remains way down, consumer spending remains weak, and there is a very, very long way to go before we approach pre-recession employment and wage levels.
The economy is in a depression, not a recession. It was caused by moral hazard and is characterized by "Too Big To Fail", which at the end of the day really means "I Can't Allow My Campaign Sponsors To Go Bankrupt" or words to that effect.
This isn't merely infuriating: it should generate genuine rage, since it literally means that our children's futures are being sold down the pike for a pittance today. The only ones profiting are those who were deeply invested in the fraud that drove the collapse: unless that fraud is addressed, nothing will change, as Mr. Auerback correctly says.
Oh, and as an afterthought (and this is something I have repeated here a number of times): mark-to-market accounting valuations are pro-cyclical and guarantee that normal business cycle movements become crises. Mark-to-market is, in any trading environment, an invitation to mass bankruptcy and unemployment, as well as extremely risky investments and loans made during any upswing. As such it is something that only accountants can love, since they don't care about the real-world effects of accounting rules.
For the economy to really, truly, recover, we need to get both accountants and lawyers back to where they belong: support services that serve the real economy and those who create real value, rather than the parasitical entities they have become today, who aim at controlling the real economy in their own interests. Being a lawyer or an accountant should be a hindrance to your career as a businessman, not an asset.