Obama’s Tax On The Banks
President Obama and his advisors announced they were asking Congress to pass a tax on banks to loosely as he put it, pay back every dime of TARP funds used to save them. His condescending announcement blaming the banks was laughable ignorance at best and deceitful at worst. He further went on to imply that the banks should desist from sending lawyers and lobbyists to Washington and just do the responsible thing as though the banks have been shirking this financial obligation. This is great populist sloganeering, however, like most liberal assertions; they are falsehoods just waiting to be exposed. So is this a simple case of ignorance on President Obama’s part or was he lying for some ulterior motive?
The facts are: all the banks except Citicorp and Wells Fargo have paid back every dime of TARP money they in some cases were forced to accept from the government lest CEOs be removed from their positions. Both of these two banks are working diligently to pay this money back. Why? Self-interest, they don’t want to be under the government’s control. Which begs the question, didn’t Obama appoint a czar to “regulate” the salary and bonus issue of TARP borrowers that he is railing about? It wasn’t until the banks publicly complained and the Taxpayers (Tea Party Protesters) demonstrating in the streets against spend thrift behavior that the government relented to allow these institutions to pay back the TARP funds. In the liberal world apparently this was all done for the benefit of these institutions when many of them didn’t want a dime of government money in the first place, then the banks had the audacity of still turning a profit and paying bonuses to employees who’s activities made that profit possible. You see, since the banks are turning a profit and paying bonuses during the very same period they received TARP funds, then clearly they never needed the money in the first place thus conflicting with the liberal narrative, “it was a crisis, they had to do something.” The reality was, what they did wasn’t necessary much less proper, most Americans already knew this intuitively, the banks just proved it in black and white on their financial statements. Liberals really hate those pesky facts.
Under Obama’s proposal, the government controlled TARP borrowing entities of Freddie Mac ($50.7 billion), Fannie Mae ($59.9 billion), GM ($50.7 billion) and Chrysler ($12.8 billion) will not be paying this tax or fee. Now why would that be? Coincidentally, GM claimed it would pay back $1 billion (but hasn’t), Freddie and Fannie paid back some $4.3 billion and Chrysler has not paid back any TARP money nor are they ever going to do so and worse, the government, i.e. the taxpayers are going to have to throw more good money after bad back into GM, Freddie and Fannie. Why? To save jobs, you know whose jobs, the unions who financially supported the Obama election campaign. The unions by the way never took a pay cut to save their fellow worker’s jobs. Why Fannie and Freddie? Well, who is going to loan money to people who can’t and shouldn’t be borrowing money for a home? By the way, the executives at Freddie and Fannie got bonuses for moving more bad loans in 2009, so how’s that pay czar doing? The truth is, Obama needs to cover up the fact that these failed entities are financial losers, and once again the government bureaucrats in their infinite stupidity chose poorly. The only way all the TARP funds can ever be fully paid back is to confiscate the money via a tax or fee from those who are successful, namely those companies who never wanted the money in the first place. In Obama’s world, it’s not fair that his choices failed and others succeeded!
The tax or fee is going to be levied on institutions whose assets exceed $50 billion and engage in what is deemed financially risky behavior, you know like creating financial instruments that package home loans (Collateralized Debt Obligations), or insure bondholders against catastrophic financial loss or leveraged buyouts for growth and acquisition. This is not just banks but also includes insurance companies. The point of insurance is to transfer risk for a fee; hence any insurance by definition is “risky behavior”. Companies like AIG not only sell derivatives to insure against bond default, they also sell life insurance, car insurance and property insurance. The upshot here is all taxes or fees imposed by the government will be passed on and borne by the consumer in the form of higher prices for things such as: life insurance, car insurance, property insurance, mortgage insurance, all manner of business insurance policies, and loans. If demand drops off or any particular “risk” becomes uneconomical, fewer companies will offer such products thus reducing the pressure of competition to hold down prices. In other words, you, the taxpayer will pay back every dime to Barack Obama for him to spend on some other vote worthy cause.
Now when the Whitehouse thinks it’s going to claw back $90 billion over ten years time they are basing this on a failed static model which doesn’t account for the consumer’s reaction to higher prices. How many times have liberals gloated about all the money they will make in taxes only to find out later they vastly over estimated the take? Apparently, liberals believe everything will go on as before with no consequences. They want you, the taxpayer, to believe it because the implication and reality is a reduction of economic activity is the inevitable result of a tax increase.
But let’s come to the heart of Barack Obama’s false assertions, which is the rationalization for levying the tax to pay back TARP funds because some didn’t. Barack Obama blames the banks for causing the financial meltdown. A bald faced lie. It was he, Barack Obama (ACORN attorney suing banks to make liar loans), Rahm Emanuel (CEO of Freddie Mac) and Franklin Raines (CEO of Fannie Mae) who lowered the lending standards for zero down loans and the cadre of corrupt politicians like Chuck Schumer, Christopher Dodd, Barney Frank and others (Sen. Barack Obama among them in 2005) who repeatedly blocked any possibility of reforms from 2001 onwards to prevent the financial meltdown. Remember, the Democrat party line was any attempt at reforms of Freddie and Fannie were firstly unnecessary and secondly racist.
The involvement of the banks in the meltdown came in the form of one, issuing home loans under Freddie and Fannie guidelines to be purchased by them and two, packaging tranches (name for bundled loans) of loans to be sold on the open market and investing in many of those tranches themselves, all which fueled the housing bubble. Apparently, the guilt of the banks was in participation with easy loan scheme. Let’s be clear what happened here, Rahm Emanuel (President Obama’s current chief of staff) and Franklin Raines LIED to or misled the bond rating agencies into believing all loans held or packaged and sold for Freddie and Fannie had the full faith and credit of the US Government, thus giving them AAA bond status, this was in fact NOT TRUE. They also set the terms under which Freddie and Fannie bought loans from the banks and the banks loaned money under those guidelines. Both Rahm Emanuel and Franklin Raines are close friends of President Barack Obama. AIG and other insurance companies based on the erroneous AAA ratings of the bonds issued insurance instruments (now deemed risky behavior) to protect the bondholders. Insurance companies selling bond insurance for AAA rated issues was like selling hurricane insurance in Montana, the premiums were dirt-cheap since no one ever believed an AAA rated bond would default. When the defaults mounted, both the bondholders (many large banks) and the insurance companies (like AIG) were set to take catastrophic financial losses. The only way for the banks to be made whole was for the government to give money to AIG who in turn paid on the insurance policies issued on those tranches (bonds) held by the bondholders.
Why did the government feel it was necessary to keep the banks whole? Well, whose money was it that the banks used to buy these tranches? Hint, the business of a bank is to aggregate smaller depositors savings (you and me), pay them interest and then loan out that money at an interest rate which covers the depositor’s interest rate, keeps the lights on at the bank and return a profit. Had the banks not been kept whole, the FDIC would have been bankrupted in trying to meet their insurance obligations to the small depositors. And because they kept the banks whole, they also had to be consistent and keep all the other bondholders with the same insurance like China whole as well. So we see Congress had no choice but to bail out AIG and other insurance companies but on the other hand, they had no need to bail out most of the banks. The exceptions to the banks needing money were Bank of America and Wells Fargo, in this case, the government regulators came to them to arrange a shotgun wedding with failing banks, and they lied to the bank officers as to the degree of insolvency. You do remember Mr. Lewis, the CEO of B of A testifying government officials threatened him if he didn’t approve the merger or withhold damaging information about Merrill Lynch?
Given the facts, now we can see why Barack Obama lied to the American people about the need for this so called “Financial Crisis Responsibility Fee.” He had to lie, how else could he deflect and not take the blame himself for he and his friends failed policies? Barack Obama is using the tried and true liberal ploy of “projection” blames other people for thing he himself was guilty of doing. As long as he is pointing the finger, it’s not pointed at him, the perpetrator. Whether you believe the facts point to President Obama being grossly ignorant (meaning he is incompetent) or lying (meaning he is corrupt), neither defect is worthy of being the leader or representative of the US. I propose a different solution, vote the scoundrels out!