Punitive “Progress,” not Policy

15 Jan

Let no one accuse the Obama administration of failing to channel populist anger at an easy political target. For a bunch of smarty pants, egg-head, ivory tower intellectuals, the economic policy recently laid out has more to do with felling opportunistic targets than sharp policy.

Determined to get back “every single dime the American people are owed,” Obama is going to go after the dimes of those who have them, not those who owe them.

“We want our money back, and we’re going to get it,” says Obama. Fair enough. But this program sounds like the pound of flesh is required too once all the money is paid back.

The government estimates that it will lose $117B of the $700B loaned during the Troubled Asset Relief Program. The vast majority of the losses are projected to come from loans to auto companies, not banks, but more on that in a moment. To offset losses of tomorrow that haven’t happened yet, Obama would today collect money now from the 50 largest financial institutions, about $9B annually for the next 10 years.

The amount of reality this ignores almost boggles the mind:

1) The Fed Reserve just handed over, like two days ago, a record amount of profit to the Treasury Department. $45 billion. Where did they get it? Loaning money to banks as part of the bailout. Seems like the banks are paying back plenty of Obama’s dimes.

2) The banks are paying back the TARP $$$ in droves already. Two thirds of it (loaned to banks) is already paid back overall. All five of the biggest firms, Morgan Stanely, Goldman Sachs, Citi, Bank of America, and JP Morgan, have already paid it back. Locally, so has First Niagara. All of these loans were paid back with interest, so the Treasury is actually making money on the TARP program, $16B as of mid-December 2009. Astoundingly, this new fee applies to firms whether they have paid back their money or not.

3) Despite the fact that this is about recouping losses from the TARP, this new fee would apply to banks who WERE NOT ELIGIBLE for the TARP. Under the new scheme, British-owned and TARP ineligible HSBC owes $100 million a year . . . for the privilege of having suddenly unpopular back office operations in Buffalo.

Why defend financial institutions, that caused so much trouble and bear so much of the responsibility of the crisis? Because there is a simple matter of fairness: taxes should not be so clearly punitive, and the rules of the game shouldn’t change once the game is over, so the government can keep playing. Not to mention the inconvenient truth that healthy and financially successful banks are important for the success of the American economy, as evidenced by the last two years.

Insulated from the new taxes? Auto companies, not because they didn’t receive a bailout too, but because figuring out a way to tax them would be too “logistically difficult.” How about another 0.15% tax on all auto company assets? There, I figured it out. The only difficult logistical problem would be figuring out how to maintain union financial support if the Big 3 cut more jobs in response to higher taxes and fees.

Best yet, Obama has the gall to suggest that the bank executives should take their medicine like good little boys and girls and keep their mouths shut.

Obama said executives of large banks should take responsibility for the fee rather than fighting it. “I’d urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill.”

Let me remind everyone of a tiny important detail in the business world, known as the contract. I believe the financial institutions can be forgiven for believing that they were borrowing money at a certain percentage rate, and then once the loan was paid back in full, further financial obligations for that loan would cease.

You want new taxes, unrelated to the TARP, to pay for a future safety net for financial institutions? Fine. You want to limit bonuses and salaries on companies that have yet to pay back their loans? Fine. But it is fitting that a liberal Democratic administration would start imposing new fees before Congress has even finished hearings about what went wrong in the financial crisis, much less passed new regulations.

Everyone repeat the new slogan after me! Taxes before Policy! Taxes before Policy!

7 Responses to “Punitive “Progress,” not Policy”

  1. Colin January 15, 2010 at 6:07 pm #

    I’m weeping at the unfairness of it all . . .

    • Brian Castner January 15, 2010 at 6:33 pm #

      I think there is an fundamental unspoken belief among liberals that business can continue to be over more taxed and regulated, and the only result is lower corporate profit, safer working conditions, and a smaller gap between rich and poor. If only real life worked like that. Its a global economy – Goldman Sachs can move their HQ and jobs to Dubai. Just ask London. We can’t ship ALL the jobs overseas . . . or do bank employees not count as Working Families?

  2. STEEL January 15, 2010 at 9:39 pm #

    You, of course ignore the fact that these companies nearly put the country into a depression and that the current recession, caused by these banks is COSTING the country Billions (if not Trillions) in lost revenue and wages. You, of course ignore the fact that many of these banks would not currently be in existence, giving out crazy huge bonuses if the citizens of the US did not mortgage their soul to the Chinese in order to stop said depression from happening. You of course ignore the fact that these banks got a double pay-out in TARP, the direct infusion of cash and also the backing of worthless credit default swaps by the US government. They don’t have to ever payback the default swaps that were made good by you and I. These are the same banks paying out millions to lobbyist to make sure that no meaningful banking reforms ever get to the president’s desk for signing.

    So yeah, the country has 10% unemployment because these guys ran a legal pyramid scheme and you want me to cry for them because they have to pay taxes on the excessive profits they make off the very same schemes to this day.

    • Mike In WNY January 16, 2010 at 12:07 am #

      The companies were acting under pressure from the Fed’s loose monetary policies and government policies, regulations and over-spending.

    • Brian Castner January 16, 2010 at 10:12 am #

      I don’t ignore any of those facts. The companies got themselves in a mess, and were going to go under. The American people bailed them out, by loaning them money with interest. The banks pay back the loan, plus the interest. The US government and the American people make money on the loans. The companies say thank you – we couldn’t have done it without you (as they did before Congress this week). Why is the story not done? Why is the President going after the banks to recoup auto company TARP losses? Because its politically opportunistic, and enough knee-jerk Obama-supporters like you won’t logically think through how poor the policy is.

      • STEEL January 16, 2010 at 10:23 pm #

        Because the damage done to the American people by these banks goes beyond the loans that kept them in business. The loans are small compared to the true cost of the legal bank scam.

        Mike In WNY. LOL. I think I hear Limbaugh tell the same joke.

  3. Pete@BS January 16, 2010 at 8:36 am #

    I’m a Dem and I sent my concerns in an email to the President. I don’t find this to be good policy.

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