Republicans who voted for TARP are faced with a serious dilemma; the Wall Street bailouts worked, but tea baggers hate them

Republicans are faced with a serious political dilemma in the upcoming 2010 elections; almost all of them voted for TARP and supported some of the other bailouts in response to during former President Bush’s financial crisis. The good news is that the bailouts worked, preventing a deeper economic catastrophe. The bad news is those bailouts are now considered political poison by the tea bagger party base.

Sen. Judd Gregg (R-NH), who's retiring at the end of the year and is therefore unencumbered by the need to defend himself from the GOP base, has nothing to run away from.

"It was extremely effective," Gregg told me. "Not only was it effective and stabilized the financial industry, it also returned to the taxpayers almost $20 billion in interest and dividends that they would have otherwise not have."

Compare that to John McCain, who will face a primary of his own this summer. He says he and the rest of the country were lied to.

Who lied, exactly?

"The former administration," McCain said. "Paulson and all of them, whoever else was in charge. Primarily it was Paulson."

Of course, by late September 2008, everyone was calling the TARP legislation "the bailout bill" and McCain himself referred to it as a "financial rescue."

Other Republicans aren't so conspiratorial, though. Regrettable as the circumstances were, bailing out the financial sector was ineluctable--"a necessary evil," according to NRSC Chairman John Cornyn.

"We were all told by Hank Paulson that the financial system would collapse," Cornyn said. "What I'm so upset about is that the previous administration used the TARP for purposes never contemplated by Congress."

Sen. Lamar Alexander (R-TN) had a similar take. The bill was necessary, and indeed effective, but the executive branch abused it and we'd all be better off if the entire episode--from the collapse of the economy to the ensuing political fallout--had never happened.

"I can explain it," Alexander said. "I wish we didn't have to deal with it."

After primary voters in Utah ousted Sen. Bob Bennett this past weekend, the republican Senator says he'd do it all over again, even if he knew it would cost him his career. He just wishes he got more of a fair shake.

"There was a widespread misinterpretation, because I voted for the first tranche of TARP, the assumption was that I voted for the second tranche of TARP and the stimulus package and the auto bailout and the omnibus bill, none of which was true," Bennett told me. "They put it all together with a lot of help and encouragement from the Club for Growth."

For that to work, though, Republicans will need their voters to be willing to listen. For the time being, they're not.

"It was not hard at all if I could get the voters to listen," Bennett said. "My challenge was that the delegates chosen at the precinct caucuses would not come to my meetings to give me an opportunity to explain."