October 03, 2013
In a piece that told readers that the financial markets will force Congress and President Obama to resolve the debt ceiling dispute the NYT told readers that such market pressure had forced the passage of the TARP:
“There are precedents for such a denouement. After the House rejected initial legislation authorizing the bank bailout known as the Troubled Asset Relief Program during the financial crisis in late September 2008, the Dow Jones industrial average plunged more than 700 points in one trading session, prompting legislators to reverse course and approve a similar bill within days.”
While the market did plunge in response to the House’s rejection of the TARP, it soon recovered most of its loss with the S&P rising to over 1150. However as the financial crisis continued to send the economy plummeting, the S&P soon resumed its downward trek bottoming out at less than 700 in March of 2009. If the drop in the market following the rejection of the TARP forced the House to take action, then it is hard to see why the much sharper drop in the market over the next five months didn’t also force strong action to counteract the impact of the downturn.
The most obvious difference was that the media openly pushed for passage of the TARP as a measure necessary to prevent a second Great Depression in both its news and opinion sections. It made no comparable push for a major stimulus package.
It is misrepresenting the facts to claim that the markets forced the House to pass the TARP. It was the coverage by the major media outlets that pressured Congress to bail out the Wall Street banks.
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