Friday, January 15, 2010

Obama: "Every single dime" (unless it went to GM, Chrysler, AIG, Fannie or Freddie)

Yesterday President Obama unveiled his plan to levy a new tax on the country's largest banks, blatantly exploiting what the administration believes is a pervasive anti-Wall Street sentiment among Americans.  From Bloomberg:
President Barack Obama said the levy he wants to impose on as many as 50 large financial firms is aimed at getting back “every single dime” that taxpayers put in to bailing out those companies.

“My determination to achieve this goal 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 said at the White House. “We want our money back, and we’re going to get it.”

The fee would apply to financial companies with assets of more than $50 billion. It would be based on bank liabilities and imposed starting June 30 on companies such as Citigroup Inc., American International Group Inc. and Bank of America Corp.

The administration estimates the levy will raise $90 billion over 10 years and $117 billion over 12 years. An administration official who briefed reporters said the budget office estimates the 10-year figure will be enough to recoup all the losses in the Troubled Asset Relief Program.
The Heritage Foundation  lays bare the purely political motivation behind this wholly misdirected plan:
Facing rising populist anger over his administration’s billion-dollar bailouts, President Barack Obama proposed a $117 billion tax over the next 12 years on financial companies with assets of more than $50 billion. “We want our money back, and we’re going to get it,” the President said. The President is half right. Taxpayers are going to get their money back from the banks that received bailout money … but don’t expect to see any of the money the Obama administration poured into General Motors and Chrysler at the behest of their union allies. That is where the real losses are coming from.

The TARP program has so far distributed $247 billion to more than 700 banks. Of that, $162 billion in principal and $11 billion in interest and dividends have already been repaid. Except for AIG, almost all banks that received taxpayer money are expected to pay back the American taxpayers in full. As The New York Times reports: “The losses from the bailout fund are expected from money paid to rescue Chrysler and General Motors and the insurance giant American International Group, and from a program to help homeowners avert foreclosures.”

So the real deadbeats that are not giving us “our money back” are not the banks, but the union-backed car companies and failed government mortgage modification programs. But guess what? The White House has chosen not to include the car companies among the institutions that will pay this so called “Financial Crisis Responsibility Fee.” Also exempted are Fannie Mae and Freddie Mac, the government-sponsored entities that helped create the crisis. [snip]
In sum, this new $117 billion Obama tax will penalize firms that already repaid TARP, and some who never accepted bailout money to begin with, while also making it harder for Americans to get the loans they need to help our economy recover, all while letting the real deadbeats get off scot-free. If the President were serious about making taxpayers whole and restoring confidence in the banking sector, then he should end TARP now.
Yes, that's right.  Financial institutions that did not want or need bailout money will be directly impacted by this "special" tax, but the President defended the plan as logical and fair:
Even companies that didn’t receive TARP funds would face the fee. The administration is using the argument that that every major financial firm in the U.S. is a beneficiary of government steps to bolster the industry.

“The tax will penalize the firms who repaid TARP with interest and those who never even accepted it to begin with,” said Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, which represents large banks. “It will decrease the availability of loans and limit economic recovery.”

Obama called “twisted logic” the criticism from the industry that the fee is unfair and warned major banks that trying to pass the cost on to consumers would backfire. (Emphasis mine)
The President's statements betray a complete disconnect from the realities of market economics.  His bank tax plan is a shameless continuation of the Democrats' penchant for punishing performance and rewarding corruption and incompetence.

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