“They could have been tougher on pay and dividends,” wrote University of Chicago economist Anil Kashyap, who strongly agreed that the bailout helped keep unemployment in check. “The question presumes Paulson’s forced alternative. If the only choice is between evil and Armageddon, evil might look ok,” wrote Luigi Zingales, another Chicago economist who agreed that bailout was helpful.
Stanford economist Pete Klenow, who said he was uncertain about the bailout’s impact on unemployment, pointed to a 2009 paper that argues that the government could have asked more from the banks in return for TARP and the debt guarantees. “If the government had applied the same terms Warren Buffett obtained from Goldman, taxpayers would have gained between $39 and $55bn, instead of losing between $21 and $44bn,” wrote Zingales and Pietro Veronesi.
They acknowledge, however, that the government might not have had such leverage over the banks at the time. And it’s certainly easy to have 20/20 hindsight. But TARP-watchers have revived such questions as more information is coming to light about how the bailout benefited banks without extending as much help to ordinary Americans as supporters had hoped at the time.