The Great TARP Disinformation Campaign - Part Two
By John Titus
In Part One we exposed several of the lies that TARP advocates robotically repeat in an effort to defend the bailout legislation that Senator Jim Inhofe (R, OK) called "the most outrageous vote in American history." (0:40)
(Lest readers recoil at the citation of authority from the red sock puppet party, shrewder members of the blue sock puppet party such as Rep. Brad Sherman (D, CA-27) and Rep. Marcy Kaptur (D, OH-9) saw through the transparently ridiculous TARP sham as well, though even she fell victim to Ben Bernanke’s story that a “credit freeze” had brought the economy to its knees, which as we noted in Part One was exposed as a complete lie just days after TARP passed by none other than Bernake's own minions inside the Minneapolis branch of the federal reserve.
Missing from Part One was an exposition of the greatest TARP lie of all, originating from none other than Chairman Benjamin Bernanke himself, who testified before Congress that the $700B bailout was "solely for the strength and recovery of the U.S. economy" (right out of the gate at 0:03), not rewarding Wall Street executives for destroying their companies with fraudulently bad wagers.
Specifically, the head of the Federal Reserve falsely told Congress that “credit markets are not functioning.” By way of that false premise, Bernanke speculated that unless TARP passed, ordinary Americans would experience an entire gamut of severe economic consequences, including:
• “jobs will be lost” (0:07)
• “the unemployment rate will rise” (0:09)
• “more houses will be foreclosed upon” (0:12)
• “GDP will contract” (0:15)
• “the economy will just not be able to recover in a normal, healthy way no matter what other policies” (0:20)
• “significant adverse consequences for the average person in the United States” (0:56)
It has been 30 months since Bernanke speculated about what would happen to Main Street without its $700 billion dollar Wall Street bailout—and by implication what benefits ordinary Americans could expect to receive with the passage of TARP.
It is high time to look at Bernanke’s scorecard for the many promises Bernanke made in September 2008 about the wonderful recovery the economy would experience with the passage of TARP.
1. Was Bernanke correct that TARP would prevent jobs from being lost? When Bernanke made his famous TARP promises, headline unemployment—line U-3 of Table 12 from the monthly BLS unemployment data—stood at 6.2%. The more realistic U-6 unemployment rate stood at 11.6%. Unemployment is now at 8.8% (U-3) and 15.7% (U-6), having peaked in October 2009 at 10.2% and 17.4%.
Conclusion: TARP failed to prevent job losses
Score: 0-1 Bernanke
2. Was Bernanke correct that TARP would prevent more houses from being foreclosed on? In February 2010 alone, there were 290,000 homes foreclosed on, up 5.9% from January 2010. That was bad enough to leave even pie-eyed recovery propagandists to lament, "It's a bit worse than I expected," says Mark Zandi, with Moody's Economy.com. "It shows the foreclosure crisis continues to intensify.”
Even using a discounted monthly rate of 250,000 foreclosures per month translates to an annual foreclosure rate for 2010 of 3,000,000 homes. In 2008, by contrast, there were 2,330,000 foreclosures—an increase of 29% since Bernanke said TARP was needed to prevent more foreclosures. (The real figure, without the Bernanke discount, is 49.4%.)
Conclusion: TARP failed to prevent more foreclosures
Score: Bernanke 0-2
3. Was Bernanke correct that passing a bill that transferred $700 billion out of the U.S. Treasury and into the pockets of Wall Street banks would occasion the rise in GDP? The question itself is ridiculous, as deficit spending automatically increases GDP, which counts more national debt as a positive thing, as Karl Denninger has repeatedly pointed out. Crediting Bernanke for “predicting” a built-in rise in GDP is akin to crediting a prediction that punching 2+2 on an HP 11C calculator will cause its screen to flash “4.0000”—forget it.
Conclusion: Yes, two plus two equals four
4. Was Bernanke correct that passing TARP would occasion a “normal” and “healthy” recovery? The mainstream media propaganda machine frequently proclaims that there has been a “recovery” since some time in 2009, but not even these Fed apologists call the recovery “healthy.” Rather, they hedge their bets by describing the so-called recovery as “fragile.” Even Bernanke himself has backed off from his prediction, now calling the much-heralded recovery—even with the unforeseeable assistance of the Fed’s “quantitative easing” cash spigot that started blasting after TARP was passed—“weak.”
Conclusion: TARP failed to result in either a “normal” or “healthy” recovery
Score: Bernanke 0-3
5. Was Bernanke correct that TARP would help the average person in the United States avoid adverse economic consequences? When Bernanke made this prediction, there were 31.6 MM Americans on food stamps. For January 2011, that number was 44.2 MM, an increase of 13.3 MM hungry mouths (up 43%). That’s what happens when the number of American workers in the labor force plunges from 136.7 million down to 131.5 million—despite the fact that the number of working-age Americans has increased over the same September 2008-to-December 2010 time frame.
The drop in the labor force since TARP passed is so severe that the percentage of Americans with jobs is at a three-decade low of just over 45%.
Conclusion: TARP failed to shield the average person in the United States from adverse economic consequences.
Score: Bernanke 0-4
Well, there you have it. Bernanke’s assurances that the $700 billion TARP bill was all about helping out Main Street was either a bald-faced lie or a staggering display of stupidity and ineptitude, take your pick.
We will have more to say about the true nature of Bernanke’s predictions about what “would” happen in future posts. It suffices to say for now that they aren’t predictions at all—just threats by the unelected head of our monetary system. That is the reality of our system of governance today.