TARP Turns One

Taxpayers stand to lose between $100 billion and $200 billion on TARP -- Treasury's $700 billion financial market bailout.

While that's nothing to sneeze at, many experts say that the Troubled Asset Relief Program helped rescue the economy from a second Great Depression.

But there are others who argue that the billions of dollars that taxpayers shelled out simply delayed an inevitable epic collapse of the financial sector.

A year ago, when the financial markets were in turmoil, the Bush administration and supporters in Congress said TARP would be used to buy banks' troubled assets, and would be an investment -- it could even turn a profit.

I agree with the view TARP saved the economy for a second Great Depression. A significant cause of the financial crisis last October was a lack of confidence, and the inability to accurately quantify and communicate risk exposures. The capital infusion stanched that fear. On the flip side, the capital infusion locked these loan losses within the banking system. If the banks weren't so large and intertwined, a true capitalist society would let them fail and new green sprout banks would arise. This did not happen. This a major reason why most economist believe economic growth will be slow. Bank earnings are being allocated towards loan losses, not building capital to make new loans.

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