GOP Candidates Flee from Past Tarp Support

WASHINGTON — As the Republican presidential race enters a more combative phase in which candidates are seeking to establish themselves as the true conservative choice, each contender's position on financial bailouts is facing heavy scrutiny.

At last night's debate in Las Vegas, several of the candidates tangled over the Troubled Asset Relief Program, the 2008 bailout program that has become politically toxic for those courting conservative voters.

Rick Santorum, the former Pennsylvania senator, used a question about Nevada's foreclosure crisis as an opportunity to attack the three leading GOP contenders — former Massachusetts Gov. Mitt Romney, Texas Gov. Rick Perry, and businessman Herman Cain — over their record on Tarp.

Romney managed largely to stay out of the fray, but both Perry and Cain were drawn into a back-and-forth as they sought to distance themselves from statements they made in the fall of 2008.

"You wrote a letter on the day of the vote, Governor," Santorum said to Perry, "saying to vote for the plan."

"There was only one plan, and that was the plan that was voted on the floor. It was Tarp," Santorum continued. "You sent a letter on that day saying vote for that plan."

Santorum was referring to a letter that the Texas governor co-wrote with a Democratic governor and sent to congressional leaders shortly after the House of Representatives voted down the first version of Tarp. The letter read, in part, "We strongly urge Congress to leave partisanship at the door and pass an economic recovery package."

Last night in Las Vegas, Perry said that Santorum had his facts wrong. "We wrote a letter to Congress asking them to act. What we meant by acting was cut the regulations, cut the taxation burden, not passing Tarp."

Despite Perry's claim, however, the letter makes no mention of cutting regulations or taxes. It also appears that Perry was sending one message to Capitol Hill and a somewhat different one to voters in Texas.

On the same day that he sent the letter to Congress, the governor's office issued a press release that read, "In a free market economy, government should not be in the business of using taxpayer dollars to bail out corporate America. Congress needs to take off its partisan gloves and work together to bring both short and long term stability to the credit markets."

As for Cain, he acknowledged supporting Tarp in 2008, but said he opposed how the Obama administration used its authority under the law.

"I have said before that we were in a crisis at the end of 2008 with this potential financial meltdown. I supported the concept of Tarp, but then when this administration used discretion and did a whole lot of things that the American people didn't like, I was then against it. So yes … I'm owning up to that," he said.

Rather than defending his support of Tarp in 2008, Romney pivoted to an attack on the Obama administration's response to the financial crisis.

"There's an effort on the part of people in Washington to think somehow they know better than markets how to … rebalance America's economy."

"And the idea of the federal government running around and saying, 'Hey, we're going to … give you some money for trading in your old car, or we're going to give you a few thousand bucks for buying a new house, or we're going to keep banks from foreclosing if you can't make your payments,' these kinds of actions on the part of government haven't worked. The right course is to let markets work."

One candidate who didn't appear onstage at the Venetian hotel nonetheless managed to insert himself into the debate over bailouts. Jon Hunstman, the former Utah governor, skipped the Las Vegas debate, opting to campaign in New Hampshire instead.

But in an op-ed article in the Wall Street Journal article on Wednesday, Huntsman wrote: "Today we can already see the outlines of the next financial crisis and bailouts. Mitt Romney admitted as much at last week's debate in New Hampshire. While he gave lip service to opposing bailouts, when asked how we would avoid bailouts he offered no solutions other than implying he would participate in a bailout of Greece."

During last week's debate, Romney said, "Clearly if you think the entire financial system is going to collapse, you take action to keep that from happening."

"In the case of Europe right now, they're looking at what's happening with Greece," Romney continued. "Are they going to default on their debt? Are they not? That's a decision which I would like to have input on, if I were president of the United States, and try and prevent the kind of contagion that would affect the U.S. banking system and put us at risk."

"But I can tell you this. I'm not interested in bailing out individual institutions that have wealthy people that want to make sure that their shares are worth something."

In Wednesday's op-ed, Huntsman, who supported Tarp in 2008, argued that the Dodd-Frank Act institutionalizes a government backstop for firms that are deemed too big to fail.

In order to eliminate what he called the government's implicit subsidy of these firms, Huntsman suggested that Congress could impose a fee on banks whose size exceeds a certain percentage of GDP that would cover the cost of a taxpayer bailout. He also seemed to endorse higher capital standards for large institutions as a way to make the financial system safer.