I feel like it’s a demented version of “Groundhog Day” for me to have to keep responding to these articles asserting financial success for the “Wall Street bailout.” I put “Wall Street bailout” in quotes because this Bloomberg article only looks at TARP, less than 2% of the total money made available to Wall Street by the government in emergency lending and support programs. Furthermore, this analysis only looks at the returns on the money given to banks and insurance companies, leaving out the money in TARP earmarked to homeowners through HAMP or the auto company rescue, or most important, the money provided to Fannie and Freddie in a continuing bailout, which is entirely the same thing, since Fannie and Freddie are taking losses on the bad loans that the banks made.

Bloomberg at least hints at the other extraordinary measures taken to save the banks:

Banks benefited from dozens of other programs instituted by the Federal Reserve and the U.S. Treasury Department during the worst financial crisis since the Great Depression, from the purchase of mortgage-backed securities to the bailout of home- lending giants Fannie Mae and Freddie Mac. The suppression of interest rates at close to zero for most of the last two years has also boosted banks’ income, enabling them to borrow money at almost no cost and lend at higher rates.

They even put Nomi Prins in the article, who states the obvious. “These are all indirect subsidies the banks got. So the TARP gains touted by the Treasury are only true if you ignore all the other costs.”

Bill Black, in his bravura performance describing the fraud at the heart of Wall Street, also touches on this, and explains how TARP has been a lead weight on the economy:

A) The repayment of TARP funds does not mean the banks are healthy. Their asset values are often grossly inflated, which means their net worth is grossly inflated. That means that the claims that we have increased net worth requirements (and that Basel III will further increase net worth requirements) are false. Net worth requirements have meaning only if the accounting is honest.

B) The repayment of TARP funds does mean that the banks are freed from any meaningful restraint on senior officer compensation. Note that absent the accounting lies the banks would often be reporting losses (and failure to meet required capital requirements, or outright insolvency) and could not pay their senior officers bonuses and would be subject to mandatory closure under the Prompt Corrective Action (PCA) law.

C) No commercial entity would have ever signed the TARP deals on the terms that the U.S. drafted for itself. The U.S. provided not only fresh money but an unlimited de facto guarantee (along with permitting phony accounting). If the U.S. had negotiated competently it would have owned virtually all the shares of every TARP recipient (which, of course, was a political impossibility).

D) The accounting lies are stalling the recovery. Markets cannot clear promptly when one creates an incentive to hold massively overvalued assets for years.

E) The losses are still there, but the taxpayers are on the hook via Fannie and Freddie and the Fed (which has taken over a trillion dollars in toxic collateral at grossly inflated values).

Just on top of all that, you have a situation with TARP where nobody at any of the major banks which caused the financial meltdown had to pay a price in exchange for this support. It was the ultimate in moral hazard, and it ensured that the banks would pay no attention to economic recovery and continue their business model of essentially thievery and self-gratification. There’s also the matter of 15 million people out of work, which results in opportunity costs for the US which have not been canceled out by saving the banks.

The bottom line is this: TARP didn’t solve the banks’ solvency problems, didn’t result in gains for the US Treasury, didn’t increase small business lending, didn’t fix the housing market or the jobs market, didn’t provide accountability for those who created the mess, and didn’t do much else beyond enrich Wall Street executives and pull them back from the brink. This is not the elements making up a success.