WASHINGTON – The government's giant bank bailout may well have averted a second Great Depression, economists say, but a lot of voters aren't buying it. Support for the program is turning into a kiss of death for many in Congress.
Longtime Republican lawmakers — tarred by their votes for the emergency aid to banks, insurance and auto companies — have been sent packing in primaries. Fresh political attack ads are lambasting candidates from both parties for supporting the $700 billion package that Republican President George W. Bush pushed through Congress at the height of the financial crisis in October 2008.
The actual cost to taxpayers will be far less than the original price tag, perhaps totaling $50 billion or less. But it's been difficult for lawmakers to make the case that they saved the nation from possible financial ruin — as some economists suggest. It's far easier for opponents, especially in political soundbites, to portray the issue as Wall Street fat cats against ordinary Main Street folks in the final-weeks cacophony of the campaign.
President Barack Obama and congressional Democrats, now in charge, have taken heat for a program that many voters see as proof that the rich guys were bailed out while the public wasn't. Indeed, both parties are on the attack.
Some recent examples:
• In Missouri, Democratic Senate candidate Robin Carnahan has been savaging Republican Rep. Roy Blunt for helping push the Toxic Asset Relief Program, or TARP, through Congress. One ad calls him "Mister Bailout." Another one, paid for by the Democratic Senatorial Campaign Committee, asserts: "When our economy collapsed, Washington is where Roy Blunt took the lead and voted for the $700 billion Wall Street bailout."
• In Connecticut, Senate candidate Dick Blumenthal hit Republican Linda McMahon during their debate Monday night for signaling support for TARP. She has called it "a necessary thing to do at the time." He says he opposes it.
• Ohio Democratic Rep. Mary Jo Kilroy is trumpeting her opposition to the legislation as a freshman member. "I voted against the bank bailout and took on Wall Street to protect your money," she says in one of her TV spots.
• The U.S. Chamber of Commerce, the nation's most powerful business lobby, is spending millions on ads trying to elect candidates who oppose the TARP bailout and last year's $814 billion stimulus package — even though the chamber supported both programs at the time.
• Rep. Chet Edwards, D-Texas, admits he's vulnerable because of his TARP vote. "It may cost me votes. It may cost me an election," Edwards told the Dallas Morning News editorial board. "But it was the right thing to do."
Some Republicans who supported the package have already been cast aside; Sen. Lisa Murkowski of Alaska and Rep. Mike Castle of Delaware were defeated in GOP primaries. Republican Sen. Robert Bennett of Utah was rejected at a GOP convention, where fellow Republicans taunted him with chants of "TARP, TARP."
And Democratic Sen. Blanche Lincoln of Arkansas came close to losing the Democratic nomination for re-election in part because of her support for the bailout.
She was among the 67 senators who voted for TARP in 2008.
Candidates, particularly those with ties to the tea party movement, have railed against what they see as a "bailout nation."
TARP officially ended on Sunday when the government lost its authority to tap remaining funds. However, it is still possible for the Treasury to add to any program that was in place as of last June 25.
Despite the political venom, the program has turned out to be far less expensive than the original $700 billion price tag.
As of Sept. 30, the government has spent $388 billion of the $700 billion, and $204 billion of that has been repaid, the Treasury Department said Tuesday in a "Two-Year Retrospective" of the program.
Furthermore, the government has received about $30 billion in interest, dividends and stock sales.
Thus, taxpayers right now are on the hook for about $154 billion. But that doesn't include future income and gains from stocks and other assets still held by the government from aid recipients.
The White House projects the program will end up costing about $50 billion, possibly less. That's down from the $66 billion the nonpartisan Congressional Budget Office estimated in August.
Some administration officials suggest it could even wind up earning taxpayers a small profit.
Treasury Secretary Timothy Geithner, in a cover letter to Tuesday's report, noted the legislation had strong bipartisan support when passed. Since then, he said, "many have lost sight of the pressing need" for the program and have criticized it — wrongly, he suggested.
So why is TARP so maligned?
For many voters, the bailout program is a symbol of government meddling and waste at a time when unemployment is at 9.6 percent and budget deficits are soaring. It was approved shortly after the failure of Lehman Brothers, one of the nation's largest investment banks, as credit markets were freezing up in fear.
"It was clear that when Lehman went down, we were within hours of no ATM machines working any more," said GOP strategist Rich Galen. The bailout "was unfortunately necessary," Galen said, and then it was followed by disclosures of big bonuses, executives' golden parachutes, golf outings and parties while Wall Street banks took government money.
Said Galen: "It quickly became seen as a bailout for people who were in danger of losing their summer house in the Hamptons as opposed to the guy with the hardware store on Main Street who was left dangling."
But listen to nearly any economist and the program has been a big success.
"Even though it could have been done better, it saved the banking system by stabilizing it," said Joel Naroff, president and chief economist for Naroff Economic Advisers. "If we had let the system crash and burn, we probably would have lost a couple of other large banks and maybe another 500 or 1,000 small and mid-sized banks. It would have been a total disaster without it."
Not all reviews have been positive.
The Government Accountability Office, a congressional watchdog, said Monday that the Treasury bailed out dozens of banks with known financial problems. It called for better monitoring of banks seeking to tap a new $30 billion lending fund proposed by the administration and passed by Congress last month to spur lending to credit-starved small businesses.
The administration's plans to use $41 billion in TARP money to help people refinance mortgages to avoid foreclosure has been a bust so far. Less than $1 billion has been spent on the program.
Associated Press writer Julie Hirschfeld Davis contributed to this report.