Sunday, January 24, 2010

Bank Of Obama: Where The Distraction Is

President Barack Obama is channeling infamous bank robber Willie Sutton. Over his career Willie Sutton was purportedly responsible for robbing over $2 million from banks. When asked why he robbed banks legend has it that Sutton responded by saying, “because that's where the money is." President Obama obviously agrees with Mr. Sutton and knows this all too well given his latest legislative “heist” proposal.

Since President Obama is incapable of and refuses to control budgetary costs due to his reckless government spending programs he predictably, like a good little socialist, is attacking and attaching corporate America profits to do his job for him. And which corporate industry does he target? Again, predictably, he pursues his favorite corporate “whipping boy’, the financial institutions “because that’s where the money is”. But is it really about money or is there something else afoot with Mr. Obama's latest socialist brain child proposal?

Obama has now proposed legislation to Congress to impose a 0.15% fee on certain liabilities of financial institutions with more than $50 billion in assets to, ostensibly, help recoup TARP bailout dollars and trim the federal budget deficit. This temporary (and we all know how long temporary is) fee, aka tax, is expected to raise as much as $90 billion over 10 years.


Let’s once again attempt to comprehend the sophistry behind this latest and greatest ObamaNomic socialist/populist proposal, which is no more than a means to mask his socialist policies to date, force feed Americans more of the same and curry favor with his socialist political base. To quote Shakespeare’s Henry V, “Once more unto the breach, dear friends, once more”.

David C. John of the Heritage Foundation helps to that end and provides excellent insight into the “Obamalogic” surrounding the President's latest proposed legislative debacle. To quote Mr. John’s reasoning,
“When President Obama announced the details of his Administration's plan to tax financial institutions, he said, "We want our money back, and we are going to get it." However, he doesn't seem to care who pays the money back, as most of the firms who would be forced to pay the "fee" either paid the money back with interest, took TARP money under duress only because the Treasury told them that they had to, or never took any money in the first place. The companies that have caused most of the TARP losses so far--GM and Chrysler--are exempt. The White House needs a villain to blame for the nation's continuing economic woes, and Treasury desperately needs revenue to reduce the massive deficits caused by the Obama Administration's spending policies. This is the wrong approach to reducing the swollen deficit and would inevitably cause more problems than it solves. It is a bad idea being used to score political points and should be dropped.”

Mr. John also notes major some points on how this Obama bank tax is both ineaquitable, economically unsound and politically motivated:

  • With one exception, the Obama bank tax does not apply to the entities that caused TARP's losses. As of September 30, 2009, TARP lost money on its bailout of AIG, auto companies GM and Chrysler, and the administration's program to help people refinance mortgages. TARP's other programs actually showed a small profit and Congress is certainly not going to make those individuals who benefited from the mortgage refinancing plan repay the losses of that program. The fee would not apply to Chrysler or GM, either.

  • the Obama bank tax is not designed just to recapture some of the profits that financial institutions made last year since it would apply to both profitable and unprofitable financial institutions. This structure would make it even harder for undercapitalized financial institutions to rebuild their financial strength and increase the risk of failure if the economy goes back into recession.

  • the Obama bank tax would be on top of both (1) another proposed new Obama FDIC fee that would apply to roughly the same group of financial institutions, and (2) the corporate income taxes that they currently pay.

  • the Obama bank tax is not structured in a way that would reduce irresponsible risk taking. Although the cost will be highest on firms that use riskier ways to finance their operations, the 0.15% level is not high enough to discourage them from doing so. Instead, this Obama bank tax is much more a case of Washington seeking a “cut of the bank’s action”.

  • despite claims that the Obama bank tax would be collected only until TARP deficits are "paid for" (about 10 years), history suggests that these temporary taxes become a permanent tax.

  • Warren Buffet, chairman and chief executive officer of Berkshire Hathaway Inc., is not pleased with this latest Obama proposal and had this to say about it,
    “I don’t see any reason why they should be paying a special tax. Supporters of the plan to tax the banks are trying to punish people. I don’t see the rationale for it. Look at the damage Fannie and Freddie caused, and they were run by the Congress. Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so. Most of the banks didn’t need to be saved.”

    Doug Elliott, a fellow at the Brookings Institution in Washington and a former managing director at JPMorgan Chase & Co, is quoted as saying, The politics on this is really quite easy. The public would be supportive of anything up to shooting and burning the bankers.” For more comments on the pros, cons, likes and dislikes of the proposed Obama bank tax The Hill has commentary from an array of yea and nay sayers.

    But all of the above must take time to understand the ObamaNomic sophistry behind Obama’s new flavor-of-the-week proposal. In his January 16, 2010 radio address Mr. Obama paints the picture of the bank "villain", handlebar mustache and all, quite well ,
    “Like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect. The very same firms reaping billions of dollars in profits, and reportedly handing out more money in bonuses and compensation than ever before in history, are now pleading poverty. It's a sight to see. If banks can afford to pay out all those bonuses, he said, then they can repay taxpayers, too. "We're not going to let Wall Street take the money and run. We're going to pass this fee into law,"

    So there we have it-- a new Obama piece of larcenous legislation that is inequitable, benign as far as contributing to reducing the Obama deficit, will only reconfirm financial institution’s fears as to future uncertainty under the Obama economic regime and, in turn, will cause less business lending and greater effort toward retarding job growth.

    Mr. Obama will, in his narcissistic sophist manner, exploit successful institutions to cause all of the above to mask his failures and socialist agenda, politicize an ongoing failing economy (which he created), along with blurring the lines even further between free and government-controlled enterprises. All of this done at the expense of the American worker.

    In response to the question posed at the outset as to whether there is something else afoot here, other than money, with Mr. Obama's new and improved bank crusade I submit there is and it's called the old "shell game". A distraction from and an opportunity to continue the failed Obama socialist economic policies and agenda. Mr. Obama is simply applying his hero Saul Alinsky's "Rules for Radicals" #11--pick the target, freeze it, personalize it, polarize it. And the target for President Obama is the banks.

    Recall that Willie Sutton said he robbed banks because that’s where the money is; President Obama robs them because that’s where the distraction is.

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