Surprise! The TARP bailout of October 2008 seems to have turned out remarkably well. The Troubled Assets Relief Program, which was and still is attacked by conservatives and Tea Party critics as a $700 billion bailout for Wall Street giants who should have been allowed to fail, is now anticipated to eventually only cost the federal government about $25 billion, according to the Government Accounting Office.
When a policy that is widely criticized as wrong-headed in principle actually works, it presents ethical problems for both advocates and critics alike.
A few helpful tips:
- To those whose objection to TARP was that the government has no business preventing corporations from failing, no matter how big they are or what damage their failures might do to the economy: Stick to your guns. The ethical value here is integrity. You obviously reject utilitarianism, which means that you don’t believe results justify breaching core virtues.
- To those who believed that the bailout was unfair but supported it anyway as a matter of self-interest and expediency: You are not forgiven. Breaking an ethical principle remains unethical, even if it turns out well later. The fact that TARP will turn out well may be only moral luck…good fortune that minimizes the impact of an unethical decision.
- To those who believed that the crisis justified an exception to general principles, recognizing that real life does not always permit rigid adherence to rules, even sound ones: You may justifiably use the TARP experience to argue for utilitarianism in policy making. The costs were exceeded by the benefits. Remember, however, that exceptions make terrible rules.
- To those tempted to use the success of TARP to prove that it was ethical (and who would have taken the failure of TARP to show it was wrong): Don’t. That is consequentialism. If TARP was wrong, the fact that it worked doesn’t make it right. We judge conduct based on conditions when it occurs, not on the unpredictable future results.
- To those on the Right who have been arguing that TARP was not only an abuse of government power, but also a waste of money and a policy disaster in making: Be fair and courageous and admit you were wrong about the last part. You don’t have to abandon your principles, but let’s face it: you were mistaken.
An one more caveat: the success of TARP does not prove that the Obama stimulus package was either more or less responsible. The fact that one huge risky federal expenditure works out well cannot fairly be used to assess another that had a different objective. entirely.