Because some will always take a skeptical view of calamity averted -- especially where government action is concerned, we may be debating last year's TARP programfor decades, and we took it up again on The Kudlow Report.
In the history of the republic there may not be a more unpopular, maligned -- yet successful -- federal program than the TARP program. No one likes the idea of the government spending hundreds of billions of taxpayer dollars to prop up private firms. We also don't like firemen to come to our house to break down walls and blast water -- unless our house is ablaze, that is! And when the firemen do come, you thank them -- you don't complain that they trampled dirt on the rugs.
In the fall of 2008, long before anyone mentioned the idea of a rescue of the financial system, that system was engulfed in flames.
We were in the midst of a financial conflagration, and stepping aside and letting the system burn to the ground wasn't an option. The spectacular collapse of Lehman Brothers showed the carnage that would follow -- on a global scale -- the failure of another big, interconnected financial institution.
TARP -- along with extraordinary actions by the Fed -- saved our financial house, and kept the blaze from spreading.
Yes, the program changed from buying assets to capital injections -- but that program is now delivering high returns back to the taxpayer as banks return the investments with interest and buy back stock warrants.
And yes, the rescues of AIG, Citi, Bank of America, and Fannie and Freddie are more risky and could very well cost taxpayers. But the alternative - letting these institutions to collapse -- would have been far more costly, and would have permanently damaged the U.S. economy. As odious as it is, the failure of a firm as intertwined as AIG would have been so disastrous that its rescue was warranted even if taxpayers never recover their investment.
My old friend Jerry Bowyer argued that rather than averting a financial meltdown, the TARP program caused it -- along with a reprisal of the mark-to-market accounting argument. I don't buy it, and facts aren't there to support it. The crisis preceded any government action, including TARP.
And as for mark-to-market? It's a red herring. This wasn't an accounting crisis; it was a crisis of trust, with roots in assets that were so toxic no one, save vulture funds, would touch at any price. Changing mark-to-market rules last fall would have had limited -- and probably close to zero -- effect on the perception of bank health.
There's a long way to go, but we have a U.S. financial system on the mend today, and it's going to pay off for taxpayers and the American economy well before the critics and skeptics let the dust settle on this debate.
On CNBC.com now:
- Read what our other guest bloggers are saying
- Money Politics with Larry Kudlow
- Slideshow: Biggest Holders of US Gov't Debt
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.