Stiglitz: TARP Returns a "Drop in the Bucket" Compared to Damage Done
Posted Oct 27, 2010 12:18pm EDT by Aaron Task in Newsmakers, Recession, Banking
…, such talk misses the big picture, says Columbia Professor and Nobel Prize-winning economist and author Joseph Stiglitz.
"The fact some of the banks paid back what was given to them on very favorable terms...is just a drop in the bucket compared to damage done to the economy," Stiglitz says in the accompanying video, taped at The Economist's Buttonwood Gathering.
Including the "enormous hidden subsidies to the banking system," the real economic cost of the bailouts is in the trillions, Stiglitz says.
"If the U.S. government had provided money to ordinary business at zero interest rates, what would our economy be like?," Stiglitz wonders. "What we did is give zero rates to banks, they then lent at much higher interest rates; that's the recapitalization. That's the gift."
Meanwhile, low interest rates have crushed savers and anyone living on a fixed income, he notes.
As to the idea that the bailouts worked because the financial system was saved and the economy rebounded, Stiglitz has a sharp retort: "We've managed to stabilize the economy [but] we shouldn't confuse stabilization with recovery...[and] the way they stabilized it unnecessarily impaired the ability to have a strong recovery."
Click on the following for more details; stiglitz tarp returns a "drop in the bucket" compared to damage done: Tech Ticker, Yahoo! Finance
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