The Real Reason TARP Lost Money On Car Companies But Not Banks

GM employee

Photo: via Wiki Commons

With TARP winding down, there are plenty of folks in the media pointing out how the program “worked” and how the only money lost in the scheme was on the car companies (which really should never have been part of TARP) and not the banks.This is true, but remember, the financial industry rescue had two components: The TARP side and the monetary side — the aggressive reinflation of financial assets by the Fed.

Unfortunately, this didn’t help the auto companies much. There’s no mark-to-myth for automakers, and the Fed can’t pump up the value of an automobile. If they could, we probably wouldn’t have lost much money on the car companies, either.

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