When it first came before the House of Representatives, the Troubled Asset Relief Program (TARP) was defeated after House Republicans failed to deliver on their promised votes. At the time, House Minority Whip Eric Cantor (R-VA) and other House Republicans circulated a plan that, instead of authorizing the government to purchase toxic assets, would have it ensure hundreds of billions of dollars in mortgages.
Cantor claimed that the plan “does not leave the American taxpayers with the bag and makes sure that Wall Street pays for this recovery.” However, as economist Robert Waldmann noted then, “I can’t manage to find any reason to doubt that the House Republicans’ plan would destroy the US financial system,” as it actually gave mortgage holders an incentive to push for defaults (since the U.S. would explicitly cover the losses).
As it turns out, former Treasury Secretary Hank Paulson didn’t think very much of Cantor’s plan either (or the GOP response to the economic crisis, as a whole), and in his memoir derides Cantor’s “unformed” proposal:
[M]eetings with the Senate GOP were “a complete waste of time for us, when time was more precious than anything,” and Eric Cantor’s suggestion that TARP be replaced with an insurance program was met with outright derision from Paulson. The usually un-snarky Paulson hits the minority whip with particularly hard, ridiculing Cantor’s insurance plan by sarcastically suggesting the administration abandon efforts to prop up the collapsing financial system – just to try out Cantor’s unproven, “unformed” insurance scheme. “I got a better idea. I’m going to go with Eric Cantor’s insurance program,” he writes. “That’s the idea to save the day.”
TARP, for all of its warts and lack of accountability, really did pull the economy back from the edge, and the ultimate losses are going to be far below the headline $700 billion (and in theory will be totally recouped by the Obama administration’s proposed bank tax, which Cantor opposes).
This completes what has been a bad week for Cantor. He has had to answer a slew of questions about his obvious hypocrisy regarding the economic stimulus package, which he voted against, but still trumpets projects from. And he has continued this game, appearing on Greta Van Susteren’s Fox News show last night to claim that “jobs weren’t created” by the stimulus, but he has still appeared at events to tout a high-speed rail line project funded by the stimulus that he says will “create a lot of jobs.” He has cited estimates of 85,000-160,000 jobs created by the project. Watch a compilation:
Cross-posted on The Wonk Room.