The protestors taking part in the Occupy Wall Street demonstrations around the country, despite their disparate backgrounds, seem to have settled on a recurring theme: fairness. It is not fair that Wall Street employees got a bailout and still have their jobs while so many workers in the United States have neither. It is not fair that the rich are not taxed at higher rates. It is not fair that some people are far richer than others.
Complaints about the bailout and jobs are ironic, because it did not have to be this way. Indeed, it is a tribute to the bad execution, not the bad intent, of policy that the Occupy Wall Street movement exists in the first place.
In 2008, when it was first conceived, the Toxic Asset Relief Program (TARP, now simply referred to as "the bailout") was supposed to save jobs across the economy -- not by bailing out banks but by solving the problem of toxic assets, the mortgage-backed securities at the heart of the financial crisis. This did not mean handing taxpayer dollars to banks. At the time, Senator Christopher Dodd (D-Conn.), then the chair of the Senate Banking Committee, called the proposal "stunning and unprecedented in scope and lack of detail." He went on, "It would allow the Secretary of the Treasury to intervene in our economy by purchasing at least $700 billion of toxic assets. It would allow the Secretary to hold on to those assets for years and to pay millions of dollars to hand-picked firms to manage those assets." Notice that there is no mention of a bailout: the focus was not banks but toxic assets anywhere in the system.
Congress held hearings to consider the TARP proposal, during which Henry Paulson, then Secretary of the Treasury, testified that "the $700 billion program we have proposed is not a spending program. It is an asset purchase program, and the assets which are bought and held will ultimately be resold, with the proceeds coming back to the government." Ben Bernanke, chair of the Federal Reserve, concurred, saying, "The Federal Reserve supports the Treasury's proposal to buy illiquid assets from financial institutions."
At the time, I was the director for domestic and economic policy for John McCain's presidential campaign; I remember the words, intentions, testimony, legislative language, press releases, and promises that Bush administration officials made as to what the Treasury Department needed to counter the shock to the economy. In short, they said that the Treasury Department needed to buy toxic assets to stop the free-fall, not to direct infusions of taxpayer money into the banks that were teetering on collapse.
But this, unfortunately, is exactly what happened. Shortly after TARP was passed into law, Paulson abandoned purchases and elected to direct equity injections into banks. The bailout began. And once the Obama administration took office and Timothy Geithner became Treasury Secretary, Washington announced plans to address toxic assets but then abandoned them. In short, TARP was hijacked by Paulson and Geithner and turned into a bailout for bankers, with no discipline for either the banks or the bankers. This unfairness of bailouts was not the original intention.
Similarly, unemployment -- another central grievance of Occupy Wall Street -- did not have to be so dismal. The 2009 stimulus bill was poorly crafted, with few "shovel-ready" infrastructure jobs, too much waste, and a bevy of ineffective pet programs. In the aftermath of the stimulus, the Obama administration took its eye off job creation and instead prioritized its social agenda (health care reform), green objectives (Waxman-Markey and EPA regulations), labor priorities (National Labor Relations Board agenda), and other legislative and regulatory initiatives that were damaging to economic growth. And as the coup de grâce the administration placed the U.S. government on a dangerous, explosive debt trajectory that invites a return to the worst days of the financial crisis.