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| David Brooks |
Banking analyst and regular CNBC talking head Dick Bove is doing his part to keep the TARP was 'profitable' myth afloat. Joining this cause is NY Times columnist David Brooks, who on a recent episode of Charlie Rose made it abundantly clear that accounting is not his forte. Like Bove, Brooks mistakenly believes that TARP is 'profitable'.
To my knowledge Brooks, who based on appearances could easily be mistaken for an accountant, is no financial expert. So perhaps he can be forgiven for sending his proselytizing mouth into terra incognita. Bove, on the other hand, should definitely know better.
As discussed previously here, here, and here, the only way to claim that TARP is profitable is by viewing it in isolation of the entire government bailout, which in addition to TARP includes GSE conservatorship, Fed asset purchases, etc. Bailing out Fannie and Freddie alone could wind up costing taxpayers trillions, thereby swamping any gains seen by TARP.
The results of TARP are intimately connected and influenced by the other government bailout programs. Claiming that the relatively small TARP bailout sliver is profitable is intellectually dishonest and emblematic of the accounting shenanigans which continue to distort the balance sheet picture of our financial system and government.
Is there a political motivation behind the repeated claims of TARP profitability? Establishing this perception would certainly make the the banking sector look better in the eyes of taxpayers. It would also cast a more favorable light on the massive government intervention initiated by 'Government Sachs' and Treasury Secretary Hank Paulson and then furthered by the Obama administration.
Unfortunately this notion of TARP profitability seems to have gained a toehold in the mass media. As such we can expect to see future government bailouts justified on myopic, misleading accounting.
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