A new report says no:

The credibility of the government’s $700 billion financial rescue program was damaged by claims a year ago that all of the initial banks receiving support were healthy, a new report contends.

Special Inspector General Neil Barofsky generally found that the government had acted properly in October 2008 as it scrambled to implement the Troubled Asset Relief Program to avert the collapse of the U.S. financial system.

But the report said that then-Treasury Secretary Henry Paulson and other officials were wrong to contend at an Oct. 14 press conference that all nine institutions receiving the first round of support — $125 billion — were sound.

“These are healthy institutions, and they have taken this step for the good of the economy,” Paulson had declared at the time.

Barofsky said that the fact that Citigroup Inc. and Bank of America Corp. soon required billions in additional assistance highlighted the inaccuracy of that claim and raised questions about the whole effort. In addition, Merrill Lynch, which was also in the original nine, was in the process of being acquired by Bank of America because of its weakening financial position.

Whether the bailout was popular or not and whether all financial institutions bailed out by Paulson et al. were healthy or not is irrelevant in so far that the government could simply not have allowed them to fall.

Even though we consider ourselves fiscal conservatives here at PoliGazette, we supported the bailouts for one simple reason: The economy would’ve truly collapsed if these major banks would have gone bankrupt.

That does not mean, of course, that we support (any) other bailouts. Bank bailouts are incomparable to other bailouts simply because these institutions form the backbone of the economy. If they fall, thousands or more other companies follow.

This obviously doesn’t mean that Paulson didn’t make any mistakes. I’m sure he did. He’s human, as are we all. But the overall lesson to be learned from last year is that the bank bailouts caused the recession to come slower and to be less deep. If Washington had done nothing, Western economies would’ve collapsed suddenly, which would have done tremendous social damage.

We might not have recovered from such a disaster for a decade or more while the world economy should recover in 2010 or 2011 tops now – this despite President Obama’s horrible economic policies.

To sum up, this report reinforces my conviction that bailing out the banks was the right thing to do last year; whether the public at large understands it or not. Job well done Mr. Paulson and Mr. Bush.