Timothy G. Massad, the assistant secretary for financial stability at the U.S. Treasury, where he is responsible for the wind-down of the Troubled Asset Relief Program, said last week that the government “got it right” by acting quickly to address the financial crisis.
“The response wasn’t perfect; no doubt there are things that could have been done better,” Massad said during a speech at the University of Arkansas. “But I think the government got it right by acting so quickly, and on so many fronts to combat the problem.”
Massad said TARP helped to lessen the impact of the financial crisis on American communities, adding that while some criticize the legislation as having exacerbated the country’s “too big to fail” problem, the argument “confuses what [the government] had to do to respond to the crisis from what [the government] must to do address the problems revealed by the crisis.”
“Think of it this way,” Massad said. “If your neighbor’s house is burning down in the middle of the night because he fell asleep smoking in bed, and the fire is threatening your house as well as the whole neighborhood, do you want the fire department to put it out, or do you say, no, I’d rather let it burn so we teach everyone not to smoke in bed? TARP was like the fire department, called to put out the fire. There is no question that anytime the government saves a private company with taxpayer dollars, we create a risk of moral hazard. But one must stop and contain the panic first, and deal with the reform next.”
Approximately $421 billion was disbursed through TARP, and the Treasury has recovered $405 billion of that amount as of Sept. 27.
“As TARP moves into the history books, it’s my hope that TARP’s greatest legacy will be this – that when the nation was confronted with an extraordinary challenge – in this case, the potential collapse of our entire modern financial way of life –government rose to the occasion,” Massad said.