In Vanity Fair's brand-new "Good Billions After Bad" (found via a tweet from Felix Salmon), Donald L. Barlett and James B. Steele take the Troubled Asset Relief Program to the woodshed.
The bulk of the 6,400-word story traces disbursements of TARP money that were given to banks that were either involved in unsavory financial activities -- like making high-interest loans to poor people or students -- or used the money for purposes for which it was presumably not intended -- like buying banks, or flying employees to fancy hotels, or refurbishing offices with expensive renovations.
The stunning lack of accountability for TARP disbursements has been pointed out before, especially by Elizabeth Warren's Congressional Oversight Panel. Even though it's not news that TARP was done in haste, sloppily, and with no clear accounting to Congress of what the banks did with the money, Barlett and Steele still do a great job of eviscerating the program.
But they drop the ball by not tackling the $64,000 question more directly: Would it have been better to do nothing at all, and let the big banks fail, thus running the very substantial risk that the worst credit crunch in living memory metastasize into a full-fledged depression? Barlett and Steele could have found plenty of economists who, despite holding their nose at how irresponsibly the mass infusion of capital into the banking system was conducted, do believe that immediately stabilizing the system was a critical priority in the feverish months of last fall.
But the authors don't quote a single economist.
It's hard for me to understand how you can write 6,400 words on TARP and not ask an economist's opinion on whether, on balance, flooding the banking system with capital in the middle of an acute credit freeze would have been better or worse than simply letting the chips fall where they may.