Treasury prioritized political efficacy over economic efficiency in TARP design.

Evidence

To the Treasury, it ultimately didn’t much matter whether it resorted to boutique auctions or capital injections: to be sure, Paulson and his staff might lose face through their reversal, but Paulson had been considering such action well before the TARP passed. What mattered was political efficacy, not austere academic notions of “efficiency.” The main policy objective was to stop the market free fall without succumbing to bank “nationalization,” and the capital injection program basically accomplished that. But to the economist market designers, it made all the difference in the world. — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 861

Categorization

• XREF: Connects to the broader theme of how technocratic ‘market design’ economists were absorbed into the neoliberal thought collective — echoes of the market-design literature on auctions. — connects to: Treasury officials engineered auction outcomes to avoid exposing banks as insolvent — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 852; Coase’s transaction-cost theory undermined the belief in bureaucratic planning efficiency — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin: The Making…, 461; Economic ideas can blind policymakers to the flaws of their institutional designs — Mark Blyth, Austerity: The History of a Dangerous…, 252 (+3 more)
• SEED: Angle: ‘political efficacy vs efficiency’ — how crisis response choices reveal that technocrats and administrators answer to different logics than economists assume in mechanism design.

Broader Connections

• Market designers redefined competitive prices to justify politically managed bailouts #exemplifies (0.85) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 852
• Market designers flipped their public stance on TARP once they lost auction contracts. #complicates (0.80) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 874
• Economic ideas can blind policymakers to the flaws of their institutional designs #expands (0.78) — Mark Blyth, Austerity, 252
• Banks with Fed directorships were more likely to receive TARP funds #exemplifies (0.75) — Philip Mirowski, Never Let a Serious Crisis Go to Waste, 2083
• Coase’s transaction-cost theory undermined the belief in bureaucratic planning efficiency #expands (0.72) — Philip Mirowski & Dieter Plehwe (eds.), The Road from Mont Pèlerin, 461