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Bailouts worked

Opinion of, The Fort Myers, News Press Florida Voices
Published:   |   Updated: May 16, 2013 at 07:58 PM

Four years ago this week, the United States was on the brink of financial collapse. "If we don't do this (bailout), we may not have an economy on Monday," Federal Reserve Chairman Ben Bernanke, not known for being an alarmist, warned participants in a crisis meeting on Sept. 18, 2008.

Soon after, President George W. Bush put the situation even more bluntly: "If money isn't loosened up, this sucker could go down."

Congress went on to pass the Troubled Asset Relief Program over the heated objections of opponents, who predicted that the bailout money would disappear down a black hole, never to be seen again.

Well, guess what? With the government's sale last week of $20.5 billion of stock in troubled insurance giant AIG, the much-maligned TARP is inching closer to the break-even point.

When the remaining equity holdings are sold, a modest profit from TARP is now almost certain.

Put simply, the bailouts worked.

True, in some cases the government did not do a very good job with the details, and taxpayers are out $142 billion in connection with the non-TARP takeovers of housing giants Fannie Mae and Freddie Mac.

Critics continue to argue that bailouts carry hidden costs and create a moral hazard that encourages risky behavior in the future. They have a point, mostly an academic one.

But it's time for the economic purists and the Washington cynics to admit that government can occasionally do something positive, at least when faced with a terrifying crisis. And it's time for voters to look back at who got it right and who got it wrong.