January 17, 2010

WSJ on the Bank ‘Responsibility Tax,’ (Plus Whiffs of Mob Rule and Authoritarianism, and a Biden Bonus)

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 9:40 am

Note: This post has been moved up because of its importance.

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ObamaWeWantOurMoneyBack0110From a Saturday editorial (bolds are mine):

The White House has spent months imploring banks to lend more money, so will President Obama’s new proposal to extract $117 billion from bank capital encourage new bank lending?

Just asking. Welcome to one more installment in Washington’s year-long crusade to revive private business by assailing and soaking it.

Mr. Obama’s new “Financial Crisis Responsibility Fee”—please don’t call it a tax—is being sold as a way to cover expected losses in the Troubled Asset Relief Program. That sounds reasonable, except that the banks designated to pay the fee aren’t those responsible for the losses. With the exception of Citigroup, those banks have repaid their TARP money with interest.

The real TARP losers—General Motors, Chrysler and delinquent mortgage borrowers—are exempt from the new tax. Why the auto companies? An Administration official told the Journal that the banks caused the crisis that doomed the auto companies, which apparently were innocent bystanders to their own bankruptcy. The fact that the auto companies remain wards of Washington no doubt has nothing to do with their free tax pass.

Also exempt are Fannie Mae and Freddie Mac, which operate outside of TARP but also surely did more than any other company to cause the housing boom and bust. The key to understanding their free tax pass is that on Christmas Eve Treasury lifted the $400 billion cap on their potential taxpayer losses expressly so they can rewrite more underwater mortgages at a loss.

…. In other words, the White House wants to tax more capital away from profit-making banks to offset the intentional losses that the politicians have ordered up at Fan and Fred.

The administration has owned up to TARP losses of $30 billion at GM and Chrysler. The total at stake according to the article excerpted at the linked post is $82 billion.

The way the administration is attempting to gin up support among its hopefully dwindling corps of activists has a whiff of attempted mob rule — and no, I’m not going to link to it (click on the pic to open in a new window if necessary):

ObamaOFAonBankTax011510

Who’s this “we”? Do people signing this really think they’re ever going to see any of the money?

Speaking of whiffs, the authoritarian aroma of the President’s statement (“We want our money back. And we’re gonna get it.”) is unmistakable:

UPDATE: Seriously sick irony — The author of one of the “We Want Our Money Back” e-mail missives is Vice President Joe Biden. In 2005, Biden was known as “D-MBNA” for his support of so-called “bankruptcy reform,” which tilted the playing field in favor of banks and at the expense of troubled consumers. All too many people in legitimate trouble with no way out haven’t been able to escape foreclosure because that law made filing bankruptcy a deliberately delayed process.

Byron York at National Review took a closer look at the history of Biden’s relationship with MBNA in 2008. A distinct aroma of clever corruption emerges from that piece.

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9 Comments

  1. I hate to disagree with you, but you’re wrong about bankruptcy reform…again. It did not tilt the playing field in favor of banks at the expense of “troubled” consumers. It evened the playing field which was heavily tilted to consumers because for far too many years bankruptcy became a oft-abused shield for people to duck responsibility for paying their creditors back and other financial responsibilities, for instance bankruptcy was used by deadbeat dads to avoid payments to their children.

    Also, it does not “delay” the bankruptcy process, the process goes on but it is more involved, fair and helpful to consumer and creditors alike. Despite Obama’s insistence that 50% of bankruptcies are caused by “health issues” in fact the vast majority occur because of personal irresponsibility and carelesses. Whatever Biden’s personal motives for voting for the bill it was still the correct movie.

    Despite the railing against the bankruptcy reform bill of 2005, no evidence has emerged (other than from biased anti-business special interest groups) that people who legitimately need to declare bankruptcy are being denied. As for foreclosures didn’t we all agree that people staying in homes they can’t afford was in the long term ruinous to them and then the overall economy? So foreclosure itself is not always a bad thing in the long run.

    (And no, I don’t consider “but companies kept sending me offers” a legitimate excuse. It’s like people claiming fast food adverts and places being located near them forced them to be fat. You have a mind of your own, people.)

    That said, Obama is still a lying hypocrite for all the reasons you stated above…and then some.

    Comment by zf — January 17, 2010 @ 9:25 am

  2. #1, at a minimum B-R should have included limits on punitive fees, forced arbitrary contractual changes to be opt-in instead of opt-out, and reined in the abuse of universal default, which is the equivalent of a utility deciding to charge customers more for electricity because they were late on their phone bill. Instead, it was totally one-sided.

    The requirement of a pre-filing session of some kind with a counselor slows down the process. That really isn’t arguable.

    Additionally, the legislation set up stupid (no other word) calculations designed to determine what people could afford to pay if moved to Chapter 13 that were and more than likely still are unrealistic and unachievable. If you follow the link to the primer linking to the detailed posts, you’ll understand.

    Of course I don’t agree with the Liz Warren-inspired nonsense about bankruptcies and health care, or the “the offers made me do it” (with the exception of preying on college kids, a few of whom have committed suicide as a result of being misled by banks taking advantage of ignorance). I do think that B-R has created foreclosures that didn’t have to happen where all parties involved would have been better off if the home wasn’t lost. I wouldn’t be surprised if that number is several hundred thousand.

    I doubt that bankruptcy removes court-ordered child support obligations any more than it eliminates debts to the IRS, which it doesn’t. It may force a renegotiation of court-orderd child-support arrangements, but there’s no way they disappear. Privately but legally agreed to child support may be another matter, but I doubt it.

    The thing that really frosted me about the whole thing was claim, which seems to be what moved Bush and many who should have known better to support the bill as written to do so, that 10%-15% of claims were fraudulent. Horse manure.

    I will also note that Dave Ramsey, no bleeding heart, bitterly opposed the bill, noting that it might have been the only time in his life that he agreed with Ted Kennedy.

    Comment by TBlumer — January 17, 2010 @ 10:23 am

  3. [...] This post was mentioned on Twitter by mikevolpe, Tom_Blumer. Tom_Blumer said: Bizzy: WSJ on the Bank ‘Responsibility Tax,’ (Plus Whiffs of Mob Rule and Authoritarianism, and a Biden Bonus): Fr… http://bit.ly/76wxyl [...]

    Pingback by Tweets that mention BizzyBlog -- Topsy.com — January 18, 2010 @ 12:23 am

  4. This is a follow up to my comments on an earlier thread of yours, and echos some of the things said at WSJ, it will be active Monday morning: http://www.publiusforum.com/2010/01/18/obama’s-tax-on-the-banksobama’s-tax-on-the-banks/

    Comment by dscott — January 18, 2010 @ 12:26 am

  5. http://www.publiusforum.com/2010/01/18/obama’s-tax-on-the-banks/

    Comment by dscott — January 18, 2010 @ 12:26 am

  6. Yes you are technically correct Tom, Fannie and Freddie didn’t get their money from TARP but I take Pro Publica’s implied position, they were handed billions by the government and are expected to pay it back. It still came out of the taxpayers pocket, just that one had a different name on it.

    The separate bailout of Fannie Mae and Freddie Mac also requires that they pay dividends, and those amounts are also listed below. The Treasury has collected $4,302,000,000 in dividends from Freddie Mac and Fannie Mae.

    Comment by dscott — January 18, 2010 @ 10:02 pm

  7. #6, they were handed billions by the government, but nobody expects them to pay anything back except a token amount of interest ($4.3 bil on $100+bil is token interest). Their chances of paying anything meaningful back are far, far worse than Chrysler’s. GM might on the basis of its Chinese operations, as if we’re supposed to be impressed by that.s

    Fan and Fred are the vacuum cleaners that may yet suck us all in.

    Comment by TBlumer — January 18, 2010 @ 11:44 pm

  8. #7, It’s just printed money they are handing out, what could be the harm? (sarcasm)

    Here’s a question, does the rising price of oil even though the US is using less than last year have anything to do with the whiff of inflation due to over printing??? We (I) have been warning since the Fed started down this path the dollar has to drop and since oil and the dollar are fungible, the price of oil in dollars must go up in some proportion. That proportion may not be a one for one or even 5 for one, nor is it necessarily consistently proportional during any timeframe. The thing about the value of anything is the mood (psychology) of the people at any given moment doing the valuing. Today is peachy, tomorrow is rotten tomatoes. Any cluster of events can affect the mood.

    Comment by dscott — January 19, 2010 @ 12:14 am

  9. [...] bailouts, takeovers, and looting of private businesses, through the bankruptcy courts, the tax system, or the exercise of clearly condoned mob [...]

    Pingback by Pajamas Media » Liberty 1, Tyranny 0 After Brown’s Big Win — January 19, 2010 @ 10:27 pm

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