Brock Lorber

More About: Propaganda

Treasury / SIGTARP Nonsense

A SIGTARP report was released today on the results of a survey the IG sent to banks who received TARP funds. The banks returned the surveys and the IG's report says, "see? Banks can provide information on TARP funds." Treasury said, "no, they can't," and the Washington Post mentioned the report in a wholly unrelated story.

That's it. There is nothing else to it.

And, yet, I just know the SIGTARP report is going to run the news until another celebrity dies.

Bureaucrats vs. the Marginalists
If you actually read the SIGTARP report (and, since that's the fourth link I've provided to it, you have no excuse not to), you find nothing other than a rehash of an economic debate that was settled in the mid-1800s. But, when you are producing economic propaganda, I suppose it's easier to act as if there was no such thing as a Marginalist Revolution, ushering in the modern era of economic thought.

Put simply, the Marginalists taught us that value is subjective. If you have a piece of silver in your pocket, you have a plan for using it. If I give you another piece of silver, you now have the ability to do more. The value of that extra piece of silver to you is the extra thing that you do with it. But, since I cannot have a simultaneous "control you", I can never know with any certainty which of the things you did with the silver was extra and, by extension, its value to you.

I could ask you what you did with the extra piece of silver, but any response you give me is anecdotal. I cannot verify your claim and thus cannot assign any statistical significance to your claim in any intellectually honest manner. I certainly could not describe your claim as testable.

However, this is exactly what SIGTARP is attempting to do.

Many of the banks’ responses revealed uses to which the banks put the TARP funds that can be readily tested. If a bank reports that it was able to repay a specific loan with TARP funds that it would not have been able to repay but for TARP funds, that is a use that can be tested. If a bank reports that it took the TARP funds and purchased agency MBS, that, too can be verified. If a bank states that it put the TARP funds into its account at the Federal Reserve to save for future potential losses that too can be checked.

This one excerpt is so counter-factual that it calls to question the competence of the IG, Neil Barofsky. Barofsky invalidates his own statement in the 'Scope and Methodology' appendix (emphasis mine):

These data are not sufficient for statistical inferences. They should be interpreted only as directional insights, not as definitive characterizations of the TARP recipients’ use of funds.

For his part, Treasury's Assistant Secretary for Financial Stability, Herbert Allison, correctly points out that the anecdotal responses to the SIGTARP survey are statistically insignificant (emphasis mine):

The responses of CPP participants described in your report illustrate the broad range of uses to which capital may be put, including building capital reserves, supporting lending and making investments. While those responses suggest the goals of EESA are being met, we think caution should be exercised in drawing conclusions from this data. Although it might be tempting to do so, it is not possible to say that investment of TARP dollars resulted in particular loans, investments or other activities by the recipient.

However, Allison's own propaganda website says, under 'Lending Snapshot' (emphasis mine):

In January 2009, Treasury launched a monthly bank lending survey as part of its commitment to Congress and the public to greater communication and transparency about its programs to stabilize the financial system.


[E]fforts will be taken under the FSP to further enhance the public’s understanding of banks’ lending by requiring companies receiving future government funds under new programs to report to Treasury how the capital they receive preserves or generates new lending and their plans to strengthen their lending capacity.

So, the IG report that is already causing a kerfluffle, boils down to SIGTARP wanting Treasury to collect anecdotal narratives from banks on other things they do besides lend money. I might be giving government bureaucrats too much credit here, but that seems like an awfully dumb battle to wage in the media and/or Capital Hill. After all, Allison already collects anecdotal evidence from these banks that can only be used to propagandize the effects of TARP; why should he be so vehemently averse to collecting more?

Pay No Attention
Unless Barofsky and Allison are merely demonstrating their own incompetence, this report is a shiny bauble and any conflict it intimates is illusory. Its only purpose is to divert your attention from record-setting financial sector earnings during a "financial crisis".

Be done with this nonsense and get back to 24/7 Michael Jackson!

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