TARP’s a bipartisan success

TARP’s a bipartisan success Hard to believe now, but before President Bush signed the $700 billion rescue plan into law in October 2008, it passed the House by a 228-205 vote, with 91 Republicans in support, and the Senate by a 74-25 vote, with 32 Republicans. But you won’t hear much bragging. The loudest theme on the fall campaign trail is full-throated outrage at the depravity of the bailouts and those who voted for them.

The political fallout from TARP has gotten steadily worse. It has given rise to the Tea Party and contributed to the record number of incumbents defeated in primaries. Many more will go down in November. Yet the economic news about TARP has gotten consistently better. It will cost taxpayers a fraction of that $700 billion, and may end up costing them nothing at all.

The latest good news comes from one of the supervillains of the crisis, the giant insurer AIG, which required three separate bailouts totaling $182 billion. Barney Frank, chairman of the House Financial Services Committee, believes he can pinpoint the day when public disgust with government boiled over: March 14, 2009, when word leaked that top AIG executives would get their bonuses, even though taxpayers were keeping the company afloat.

As the price of saving AIG, the government took it over. The Fed and the Treasury still have $130 billion in the company outstanding. But AIG is doing better. Its CEO predicts earnings of $6 billion to $8 billion this year. This week, Treasury will announce plans to begin the process of returning it to independence. At a plausible valuation of $60 billion (offered by an investment banker familiar with insurance companies) taxpayers could eventually recoup $55 billion. AIG will also soon divest itself of its US life-insurance unit, Alico, expected to fetch $25 billion or more in an initial public offering, and its Asian insurance operation, AIA, going to Prudential for $15.5 billion.