Previously published here.
And see the followup.
Matt Taibbi is so good at whipping up indignation about the evil bankers that it's easy to overlook the crackpot and diversionary nature of the story he is telling. It would be useful if there was public pressure, for example, to provide a postal bank that would give people an alternative to commercial banks or if the government made low cost loans available to businesses or municipalities (instead of just to banks) so that Wall Street's casino investment mentality could not cripple the economy. Tax policy that rewarded long term investment and penalized gambling with other people's money would also be useful. But Taibbi and others have displaced discussions of such options with confused and misdirected anger. For example, once he has developed the narrative a bit in his latest, he offers up the following absurd line:
Republican senators David Vitter of Louisiana and James Inhofe of Oklahoma were so mad about the unilateral changes and lack of oversight that they sponsored a bill in January 2009 to cancel the remaining $350 billion of TARP.
For instance, like so many actors in the capital, Mr. Barofsky develops backdoor relationships with the offices of friendly Republican lawmakers like Senator Charles E. Grassley of Iowa and Representative Darrell Issa of California, leaking information back and forth to shape news coverage. Then he wonders why Treasury keeps him in the dark? [NYT]
And lastly, he [Larry Summers] promised that the bailouts would be temporary – with a "plan for exit of government intervention" implemented "as quickly as possible."
The reassurances worked. Once again, TARP survived in Congress – and once again, the bailouts were greenlighted with the aid of Democrats who fell for the old "it'll help ordinary people" sales pitch. [..]
But in the end, almost nothing Summers promised actually materialized.
But in fact, with one exception everything Summers promised did materialize - especially the exit. Almost all of the money that Bush and Paulson gave to Wall Street came back to the public under Obama and Geithner. To avoid the problem this fact presents for his story, Taibbi uses a lot of invective:
It has been four long winters since the federal government, in the hulking, shaven-skulled, Alien Nation-esque form of then-Treasury Secretary Hank Paulson, committed $700 billion in taxpayer money to rescue Wall Street from its own chicanery and greed.
The pudgy, stubby fingered former World Bank economist, who had been forced out as Harvard president for suggesting that women lack a natural aptitude for math and science, begged legislators to reject Vitter's bill and leave TARP alone.
The bailout ended up being much bigger than anyone expected, expanded far beyond TARP to include more obscure (and in some cases far larger) programs with names like TALF, TAF, PPIP and TLGP
See also: Can-matt-taibbi-really-be-that-naive