With the "formal" release of the government's stress tests today - only a formality after weeks of leaks - an overlooked conclusion is this: TARP 1 worked.
Even after today's release, the stress tests' value as a forward-looking indicator of financial sector health is limited. Questions linger about the rigor of the tests and macroeconomic assumptions. We'll still debate exits and onerous provisions, and tangible equity cramdowns. Credit quality is still a huge concern. Tongues will wag about sacking CEOs and further consolidation. And unanticipated shoes can always drop.
But what the report will make clear is that the federal government's response in the midst of the cataclysmic events of last September and October saved our banking system.
Last fall our financial institutions were being taken down, one by one, like sickly water buffaloes chased by hungry lions in a National Geographic special. It's amazing to me that we can forget just how frightening those days were.
Our financial house was on fire, and Treasury and Federal Reserve officials managed to extinguish it by designing extraordinary programs, involving the most complex financial issues, and they did it in the most harrowing of policy environments.
Today, the TARP legislation is probably the single-most unpopular bill ever to have been passed by Congress. Economic historians will look on it more favorably.
The unpopularity is partly because of Treasury Secretary Hank Paulson's decisionto change the focus from purchasing troubled assets, and to instead do direct capital injections.
Paulson knew this change would severely damage his credibility. But he also knew it would be impossible to design an asset-purchase program in the time needed to save the system. (Seven months later we're still not sure we've designed a successful asset-purchase program.) It took courage to adapt the policy in the face of what was certain to be withering criticism.
What Hank Paulson and Ben Bernanke did will only become clear over time. But there's no doubt the TARP 1 capital injections - with all its problems - gave our banks the support they needed to largely pass the stress tests today.
Tony Fratto is a CNBC on-air contributor and most recently served as Deputy Assistant to the President and Deputy Press Secretary for the Bush Administration.