the tindog coffeehouse

Texas Monthly’s Paul Burka recently quoted a report on ProPublica.com, which indicated that (according to the Treasury) the federal government would actually make about $15 billion profit from last year’s $700,000,000,000 bailout rescue plan known as TARP.  Burka’s point was that even though gubernatorial candidate Kay Bailey Hutchison has since renounced the plan, she may have done the right thing in initially voting for it.

But did she?

First, the ProPublica report goes on to show that even if some parts of TARP make money, overall the government is still in the red when you factor in the rest of the program as well as all the other bailouts (AIG, Fannie Mae, GM, etc.).  So Burka’s point is moot.

But let’s assume the government did actually end up profiting from all the various bailouts.  Does that make them OK?  Or are they still unacceptable based on principle alone?

Senator Hutchison wrote in September 2008 that:

With every bailout, each American taxpayer becomes more invested in these markets. And we all have the right to ask the question, why is one firm rescued, when another must face the consequences of its actions? In a capitalist system, some risks will yield big rewards and some will lead to failure. When possible, it is better to let free market economics pick the winners and losers, not the federal government. Corporate bailouts set a dangerous precedent and stand to negatively impact market dynamics over the long-term.

So do big government bailouts still set a dangerous precedent if they not only help the market stabilize and recover but also yield a profit for taxpayers?

Again, that’s just a theoretical question since we have yet to see (and almost certainly won’t see) a return on our investments.  But in my opinion, a bailout’s potential profitability doesn’t make it right.  Otherwise, the government simply becomes a massive investment manager whose motives are driven more by the bottom line than the public good.  Which would make it just as “evil” as the Wall Street firms that the bailouts were designed to save us from.

Previously:
Report: Bailouts hurt the government’s credibility
TARP is the financial equivalent of the Vietnam War
Actual cost of TARP bailouts: $2.9 trillion