The film ends with Secretary Paulson hoping that the banks will lend out the "'cash infusions" they received from TARP and jump-start the economy. Is that what happened?
No, not at all. One of the reasons there's been such furor and anger in the country is that, in the immediate aftermath, the exact opposite seemed to happen. It was harder to get a loan, the economy continued to falter, the markets clearly kept tumbling, and there was a continued sense of panic in many ways. Some people believe that Hank Paulson, Ben Bernanke and Tim Geithner oversold the program to the public as a way to quickly lift the economy. In truth, it was a way to keep the patient from flat-lining. People were expecting a jolt and that's not what happened.
What would have happened if it didn't pass?
I think we would've had a complete and utter panic like nothing you've ever seen in your life. We would've had 25% unemployment, banks going down left and right, companies that relied on those banks going out of business. I don't know if there'd be breadlines, but there'd be lines around ATM machines, for sure.
Is it possible that we'll see that scenario if the debt ceiling isn't raised?
If the debt ceiling issue is not resolved, it is very possible we could see a panic similar to before – that’s the fear that I constantly hear from people in the markets.
What did the banks do with the money from TARP if they weren't lending it out?
Many of the banks used the money to shore up their own balance sheets. They were effectively hoarding cash because their deposits had been so depleted. They were trying to hold on to the cash to help keep an adequate capital ratio. That frustrated a lot people because they thought it was going to be lent out. And the bankers were making huge bonuses again so the anger was understandable.
How did the economy respond?
For several months, the economy and the markets continued to spiral downward. The banks had a legitimate worry about lending, because they didn't know if the people they were lending to would be able to pay them back. But there also wasn't as much demand for loans. Companies and people weren't asking for loans in the same way they had been because the economy was so depressed. That’s not to suggest that there were not people who couldn’t get loans that deserved them; that was a problem too.
Was it surprising how quickly the banks paid back the money from TARP?
Yes. I think if you were to ask someone like Hank Paulson or someone else from the administration about this, their hope was the banks would be holding onto this money for three to five years. There was a real sense of surprise about how fast they paid it back. TARP became so politicized that having money from it was almost like a scarlet letter. There were debates over compensation, worry that the rules were going to get changed. All the banks were desperately rushing to get that money back as soon as possible—in part, so they could pay themselves bonuses without any government restrictions. Of course, that made the public even more upset.