...anti-socialist, anti-globalist, and usually with an attempt at historical and economic context
Friday, January 15, 2010
Obama: We Want Our Money Back. And We’re Going To Get It.
When the 2008 bank bailouts took place, led by Henry Paulson, Ben Bernanke, and Timothy Geithner, the nine largest banks were forced to take “bailout” money even though some did not believe they needed it and did not want it.  Other banks have also received government assistance. Various banks have paid back or are in the process of paying back these TARP loans. The government has sometimes expressed a reluctance to be paid back, but has accepted repayments. Now, they’re demanding repayments and more. On Thursday, January 14, President Obama announced plans for new fees to be paid by large banks.
“‘We want our money back. And we're going to get it,’ Obama stressed. ‘And that's why I'm proposing a financial crisis responsibility fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street.’” 
The Obama Administration has worked out a scheme of large fees that are supposed to recover “bailout” funds. Striking a populist tone, Obama seeks to demonize the banks and their “obscene” bonuses, when in fact, government, including Obama, bear the main responsibility for the state of affairs that brought about the bank “bailouts” to begin with. It is remarkable hypocrisy, and not good economics.
Economics is not the Administration’s strong point, except in their efforts to damage our economy. The “bailouts” were designed to assist favored big banks (Goldman-Sachs, for example) while some financial institutions, notably Lehman Brothers, were left to die. Foreign banks got a good bit of the money also. The painting of “fat cat” Wall Street executives as great villains serves (at least) the following purposes for the Obama Administration: 1. To deflect blame for the bad economy and financial crisis from themselves
2. To present themselves as protectors of the people from the evil banks As a Reuters article points out, “Public rage at bankers, whom Mr. Obama chided in December for their ‘fat cat bonuses,’ has taken on a deeper political dimension as Democrats who control Congress weigh sweeping financial regulatory reforms in the face of stiff industry opposition.”  The strategy is to make bankers look like the bad guys the Administration is trying to protect us from. It seems to be working to some degree.
Politico notes the following: “Criticizing Republicans, he [Obama] said financial industry lobbyists are ‘locking arms with the opposition party’ to stand in the way of reform. And he called on banks not to fight the tax with a ‘phalanx of lobbyists’ and lawyers, urging them not to ‘stick it’ to their customers and shareholders by passing on the fee to them.
“‘I suggest you might want to consider simply meeting your responsibility,” he said.” 
But the Democrats’ idea of reform is to regulate to the point of micro-managing financial institutions. The banks’ “responsibility” is to obey the law and maximize stockholder value, not to make sure the government likes everything they are doing.
3. To portray the financial crisis as a failure of capitalism, when in fact it was essentially a failure of government. The fat-cat capitalists are pointed to as the problem, and now they’ve started making money again. To exploit class envy as much as possible, Obama reminds us that the American people are suffering from high unemployment (which Obama isn’t helping) while the bankers are getting big bonuses. The Administration is trying to build on the false notion that “capitalism failed,” so socialist policies are needed.
4. To distract some attention from the dismally corrupt efforts to pass the awful “healthcare reform” which most Americans strongly, and rightly, oppose.
“‘My determination to achieve this goal [recovering ‘every single dime’ of the TARP advances] is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people,’ Obama told reporters at a White House event.” 
How dare they make profits? How dare they pay bonuses? How dare they run a successful business in one of the world’s most thoroughly government-regulated environments? The fiends! Of course, substantial taxes, federal, state, and local, are paid on these profits and bonuses. I have written in favor of the government recovering as much of the TARP money as possible, as quickly as possible, and I still think that. But this is not the way. Consider:
(1) The fees of 0.15 percent of balance sheet assets on companies with over $50 billion of assets will also fall on companies that have already repaid their TARP advances or never received TARP money at all.  So this, contrary to Obama’s statements, isn’t just a plan to recover TARP, it’s a plan for punishing success. Presumably, the assistance to banks was supposed to allow them to earn a profit. But liberals don’t like private-sector corporate profits.
Apparently, the fees will continue on all affected banks until an amount equal to all the TARP advances is collected (with interest?). So it isn’t a matter of each bank simply repaying what it was advanced. It is not clear (to me, at least) how this affects government’s equity stakes in the affected companies. And, of course, “temporary” taxes and fees often somehow become permanent.
(2) The fees are supposed to recover $90 billion over ten years, but the projected TARP losses are $117 billion.
(3) The fees are, in effect, a tax, the cost of which must, as all costs must, ultimately be recovered from the banks’ customers. So these fees will have ripple effects through the economy, and various unintended consequences.
“AIG [the large insurer taken over by the government] will be subject to the fee, but mortgage lenders Fannie Mae and Freddie Mac, which are under government conservatorship, will be excluded, as will still-ailing U.S. automakers that got bailout money.”  Of course, being government-sponsored enterprises (GSE’s), Fannie and Freddie haven’t been held to the high standards expected of private companies. This just points out the hypocrisy in Obama’s chiding of big banks.
Carl Horowitz at National Legal and Policy Center writes: “The troubled secondary mortgage lending giants [Fannie and Freddie], already having received more than $110 billion in federal subsidies since the fall of 2008, are set for another major feed at the public trough. On December 24, the U.S. Treasury Department, facing a December 31 deadline, approved a no-limit hike in the publicly-traded companies' combined $400 billion credit line. Were that not enough, regulators approved an annual compensation package of up to $6 million for each chief executive officer. Welcome to pay for performance, Obama-style - not that the Bush version was a bargain.” 
A congressman from Texas makes a good point in his criticism of the bank fees: “This is the latest proposal in the Obama administration’s failed attempt to borrow, spend and tax their way into economic prosperity,” Rep. Jeb Hensarling (R-Texas) said earlier on Wednesday. “To think that banks will loan more money if you tax them is beyond economic ignorance.” 
The TARP bailouts were an ill-conceived and ill-advised idea to start with. The bailouts should never have been done. But since they were, repayment terms should have been agreed upon at the time the advances were made, and firms that didn’t want the money should not have received it.
And now, Obama should be seeking recovery only from the companies that received funds and still haven’t paid them back. At this point, Obama Administration people should be quietly working out repayment schedules with the banks that still owe money. Mostly, they’re anxious to get it repaid and get government out of their hair about it. But, apparently, we can’t expect this government to think like that. They want to score political points by pretending they’re looking out for us by punishing all the banks that are paying large bonuses.
I have sworn upon the altar of God eternal hostility against every form of tyranny over the mind of man.