How the banking collapse was avoided

NPR’s Planet Money broke the story in September that the TARP program, a.k.a., the “Wall Street Bailout”, included a provision to buy equity in banks, which was not only unknown to most observers it was unknown to most members of Congress who voted for it (classic). NPR has finally reported on the back story of how it happened “in their podcast”:http://www.npr.org/blogs/money/2008/12/hear_700_billion_bailout_myste.html.

Henry Paulson didn’t want it included because he believed government-owned companies are to be avoided, but it went in anyway thanks to the work of Jim Moran, a Virginia Representative, and Spencer Bachus, a Representative from Alabama with support from Barney Frank. It was so unwanted in the bill that the wording was vague to not draw attention to it. The interesting thing about it is not that it’s just a much-better idea than buying toxic debt (as I mentioned “here”:https://troyandgay.com/blog/2008/10/09/a-better-bailout/), but that Paulson reversed his opinion and is _only_ buying equity in banks instead of toxic debt and the reversal is credited with avoiding a banking collapse that his original plan likely would not have avoided.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s