This time IS different

Say Ed Lazear and Keith Hennessey, success is an orphan;

Observation 9: TARP is the most successful financial policy for which no member of Congress will admit having voted “aye.”

TARP, and specifically the Capital Purchase Program, succeeded. Combined with a few additional firm-specific actions, it quickly recapitalized the U.S. banking sector. After an initial failed vote in the House, the law passed both the House and Senate with significant bipartisan support. Yet today Members of Congress who voted “aye” are loath to admit they supported this program that succeeded in its core goal.

One might claim that THEY would say that, since they were members of the Bush Administration back then--Lazear was CEA Chairman and Hennessey director of the Economic Council. Still, in their paper, Observations on the Financial Crisis from the Hoover Institution, they make a pretty strong case that the Bush Administration chose wisely from the lousy alternatives they had available, and the financial crisis had been stemmed when policy was transferred to Barack Obama.

Which policies largely were followed by the new President, even when he didn't want to:

[Treasury] Secretary Geithner and FDIC Chairman Sheila Bair (who was part of the Bush team’s effort) tried to resurrect the asset purchase idea early in the Obama Administration with their Public-Private Investment Program (PPIP) proposal. They quickly ran into the same problems as faced by the Bush team and quietly abandoned the proposal a few months later.

There's even some inside baseball regarding the short-term loans to GM and Chrysler;

Had the Bush Administration not loaned TARP funds to these firms, both firms would have faced a supplier run in January and soon thereafter had to enter a Chapter 7 liquidation process. As much as we wished it had been, Chapter 11 restructuring was not an option. In more stable financial markets private debtor-in-possession financing might have been available, but in December 2008 it was not.

It remains unclear whether this resulted from a savvy strategic move on the part of both firm’s leaders, or instead from massive incompetence and mismanagement. It is possible that the leadership of both firms (correctly) calculated that policy makers would be unwilling to allow two of the three largest U.S.-based auto manufacturers to fail, and that they gambled their firms’ existence on this political prediction. In GM’s case this is reinforced by the little-known gambit they pulled in October of 2008, when they told Bush Administration officials they faced a likely supplier run the Monday before election day if they did not receive an immediate infusion of cash.

Since the result of the election was not in dispute--even Sarah Palin knew she was going to lose--it is unfortunate that the Bush Administration didn't allow that to happen. Ford, Toyota or some other auto manufacturer[s] would have been happy to inherit the customers (and the autoworkers displaced).

Also wisely, the two don't get into the question of what monetary policy should have been, since they aren't monetary economists.