Part of the reason [TARP is viewed as a bad idea] may be that voters think the 8.2 percent is coming out of their rather than the financial institutions' pockets. At least that's what I heard at several focus groups I observed earlier in the year. The participants in the focus groups bristled when they were asked about the profits the government was making on TARP. Rather than be happy about it, they insisted that the banks were repaying the TARP funds and interest with higher fees that customers were being charged rather than by reducing other costs or lowering dividends.
As someone whose employer received TARP money in 2008 and paid it all back with interest, I can say that fees for certain consumer and business accounts did increase here. Those increases were put into place over the past summer, not in 2009 and not 2008, as a response to the Financial Reform Act which restricted the ability of banks to charge overdraft fees that netted them billions a year in revenue.
Interest rates have never been lower for loans, so it's not like customers got gouged with high rates. Interest rates on deposits have also been low, but a lot of that was in response to having to maintain the "net interest margin" between loan rates and deposit rates, which is where a compnay like my employer makes a lot of money. And the last, biggest portion of the TARP payoff came from the sale of stock.
So I agree that it was a failure, but what failed was the banks' and government's work in trying to educate consumers. They did not do enough with the press to get the word out about what was going on with that TARP money, and the press really only wanted to report on the huge bonuses executives were getting. But it's not as if the public would have believed the banks and government anyway, but it was an effort that should have been made.
What would they have wanted to do with that $309 billion? I guess a lot would have wanted direct bailouts of consumers who were losing their homes to foreclosure, or direct investments in small businesses, but neither option would have been practical. The administrative costs alone in keeping track of all of that would have eaten up billions of dollars. Bailing out the banks was the most sensible thing the government could have done. Allowing them to collapse would have been so totally catastrophic to the world economy, the Tea Party would look like a real tea party in comparison to the torches-and-pitchforks chaos that would have ensued otherwise. Think about the end of the excellent David Fincher film Fight Club and you'll get just a hint.
The TARP bailout and the resulting PR nightmare that followed is just a perfect illustration for me at how embedded corporate interests are in our everyday lives. If your bank accounts are with a bank that has failed, FDIC insurance should cover you, but think about what could have happened without TARP and giant banks holding trillions of dollars in deposits had been allowed to fail. FDIC would not have been able to meet the demand. And if banks would have been allowed to fail, do you think that the federal government would have authorized the printing of enough money to meet the demand? Think about the inflationary rocket that would have been. I believe the resulting collapse of the banking sector would have resulted in a global depression. It would not be overy hyperbolic of me to suggest that such a collapse could have precipitated World War III.
But today, we have relative calm in the financial markets, peace in the world for the most part, and relative stability in our everday lives. The only panic seems to be among the right-wing element of our society.
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