Sunday, January 24, 2010

Democrats & War On The The Economy, Act II


Among the many fictions Obama sold us was that Democrats were not repsponsible for our economic meldown (Fannie, Freddie, moral hazard, race based lending standards - nothing to see there) - but rather that our finacial sector was. Obama tried to use the financial crisis to push his priorities of health care and cap and trade while tossing the infamous Stimulus into the economy in the hopes that a bill - only 2.6% of which was aimed at small business - would somehow stop the unemployment hemmoraging.

Now here we sit, well into a recession that is second only to the Great Depression in the depth of its effects and length. So what does Obama plan for an Act II that will put our economy on better footing? How about new bank regulations to limit their size and trading abilities as well as taxing our most productive banks in what amounts to a public scourging. Perhaps even more horrifying is the plan for Washington's most toxic asset, one of the primary architects of our finanical disaster, Barney Frank, to do away with Fannie Mae and Freddie Mac and replace them with a new agency created by him. What could possibly go wrong.

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Obama has floated a plan to encumber banks with a host of new regulations to limit the size of banks and the type of transactions in which they can engage. This is nothing more than an Axlerod inspired attempt to fan the flames of class anger to raise poll numbers. It does nothing to solve the problems that got it us into this financial catastrophe and it will likely put a stake in our global financial competitiveness, but it does play to the socialist meme of capitalism as the root of all evil. Thus it works for Obama, but Treasury Sec., Tim Geitner is finding it a bit difficult to get behind:

President Barack Obama's newest Wall Street crackdown was met with hesitation from Treasury Secretary Timothy Geithner, who voiced concern that politics could sacrifice good economic policy, according to financial industry sources.

Geithner is concerned that the proposed limits on big banks' trading and size could impact U.S. firms' global competitiveness, the sources said, speaking anonymously because Geithner has not spoken publicly about his reservations.

He also has concerns that the limits do not necessarily get at the root of the problems and excesses that fueled the recent financial meltdown, the sources said.

A White House official said both Geithner and Lawrence Summers, the director of Obama's National Economic Council, worked closely with Paul Volcker, who heads a White House economic recovery board, in developing the proposals.

"The plan was submitted to the president with a unanimous recommendation from the economic team," the official said.

Obama's proposals would prevent banks or financial institutions that own banks from investing in, owning or sponsoring a hedge fund or private equity fund.

Obama called for a new cap on the size of banks in relation to the overall financial sector that would take into account not only bank deposits, which are already capped, but also liabilities and other non-deposit funding sources.. . .

They come as the administration has sharpened its rhetoric against Wall Street where the announcement was met with disdain. Bank shares slid and the dollar fell against other currencies. . . .

Lawrence White, a professor at New York University's Stern School of Business and a former regulator, said Obama's proposals were "a solution to the wrong problem."

"They have this rhetoric that it was proprietary trading that was the problem," White said. "That's wrong."

Mr. White's problem is that he does not understand that, for Obama, all problems, from national security to economic, are political - and in his world, it it is the ideology of the far left that are driving Obama's politics. Capitalism is evil. It must be controlled by government and there is nothing wrong with using it as a whipping boy to gather votes. The real problems that led to our fiscal meltdown in fact have to be ignored because they implicate nearly every Democrat in Congress today, including our resident Acorn enabler, Obama himself.

In the same vein is Obama's new punitive bank tax, designed to garner votes by punishing select banks. Warren Buffet, an Obama supporter during the campaign, finds himself not exactly impressed by this latest attack:

Warren Buffett opposes President Barack Obama’s proposed levy on financial institutions because firms including Goldman Sachs Group Inc. and Wells Fargo & Co. already repaid bailout funds.

“I don’t see any reason why they should be paying a special tax,” said Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., in an interview on Bloomberg Television today. Supporters of the plan to tax the banks “are trying to punish people,” he said. “I don’t see the rationale for it.”

Obama announced a plan last week to impose a fee on as many as 50 financial companies to recover losses from the federal government’s Troubled Asset Relief Program. The levy would apply to firms with more than $50 billion in assets, including Wells Fargo and Goldman Sachs, two companies that Berkshire has investments in. It would exclude Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders taken over by the U.S.

“Look at the damage Fannie and Freddie caused, and they were run by the Congress,” said Buffett. “Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so.”

Wells Fargo, Goldman Sachs and other beneficiaries of the bailout such as Bank of America Corp. and JPMorgan Chase & Co. repaid the money they got from the government. Fannie Mae and Freddie Mac owe about $110 billion, according to Bloomberg data.

“Most of the banks didn’t need to be saved,” Buffett said. “Including Wells Fargo.” . . .

The president’s proposed tax would be imposed on firms including bank holding companies and some insurers. The administration estimates the tax will raise $90 billion over 10 years and $117 billion over 12 years.

“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 Jan. 14 when he announced the Financial Crisis Responsibility Fee. “We want our money back, and we’re going to get it.”

Let's be clear, when you tax a corporation, it always, always, gets passed through to the clientele. It will not create one new job to lessen the record unemployment in America. It will merely make our banks a little less competitive so Obama can pose as a populist champion.

And last but not least in doubling down on failure is perhaps the scariest finanical news yet to come out of Washington in decades. It is a plan for Barney Frank, one of three central architects of our financial meltdown, to write the next chapter of America's march to the finanical precipice. This from the WSJ:

A top House Democrat on Friday said his committee was preparing to recommend "abolishing" mortgage-finance giants Fannie Mae and Freddie Mac and rebuilding the U.S. housing-finance system from scratch.

"The remedy here is...as I believe this committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," said Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee.

. . . Fannie and Freddie own or guarantee around half of the nation's $11 trillion in home mortgages. . . .

What could possibly go wrong.

5 comments:

OBloodyHell said...

> said Rep. Barney Frank (D., Mass.)

Those who put Brown in office need RIGHT NOW to begin the campaign to expose Frank's part in the whole meltdown, keep it simmering in the public's mind, and push it to the forefront in a timely manner for November.

OBloodyHell said...

> A top House Democrat on Friday said his committee was preparing to recommend "abolishing" mortgage-finance giants Fannie Mae and Freddie Mac and rebuilding the U.S. housing-finance system from scratch.

This sounds like a great idea.

Putting the widiot who screwed them up in charge of "recreating" them, though, not so much of a much....

cdor said...

There is a lot of detail for an anonymous comment attributed to Geitner. The Democrats never take any responsibility for the financial collapse and the Republicans haven't said much either. These guys always think they have to make laws or they're not doing their jobs. I'd like to pay them to stay home. They make laws creating government programs that screw things up and then claim we need more government because things are all screwed up. They are rats chasing their tails.

And then there is the biggest rat of all,"We want our money back" Obama. Who's the "we", Mr President? You got a government rat in your pocket? The "we" is you and me, and we are not going to see a penny of that money. Just as GW says, those taxes will actually cost us more as the banks pass along the taxes with higher fees.

Just shtay away Barney. Keep your shpittle to yourshelf, you arrogant POS.

OBloodyHell said...

> These guys always think they have to make laws or they're not doing their jobs. I'd like to pay them to stay home.

"Don't just do something! STAND THERE!"

I commented on this idea elsewhere.

Robert Heinlein once suggested a two-house legislature -- one house passes laws with a 2/3rds majority.

The other repeals them with a 1/3rds minority.

He figured if you couldn't get 3 people out of 10 to agree that a law served a valid purpose and needed to exist, it had no business being a law in the first place.

The system should make winnowing laws easier than making them. That it's the other way around is one of our chief current problems.

We've transited from the FF's vision of a limited Federal government to a massive behemoth blundering about like a bull in a china shop... A bull elephant.

Paul_In_Houston said...

I hear you. My home state of Texas has sometimes been ridiculed for only having a part-time legislature.

I think our founding fathers had a pretty good idea of the dangers of paying grown men to do nothing but conjure up rules for the rest of us to live under.

Sometimes, I wish they had followed the thought to its'logical conclusion. :-)
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