The latest federal money-thieving ploy has Barack Obama at the throats of the country’s top bankers demanding “repayment” of their TARP debt. To quote the president: “We want our money back.” At least, that’s the determined slogan Obama is using to conceal his sparkly new scheme for helping fund his trillion dollars per pop pet projects.
I typically sneer at the common American preoccupation with obsessing over relatively minor political issues while turning a blind eye to the most significant grievances against the federal government. This particular issue, however, provides an excellent demonstration of the devious inner-workings of politicians’ minds. What Obama is really trying to do is tax America’s banks more than he does already. In order to justify the new tax, he’s invoking the massive TARP loans made in 2008, as well as appealing to the convenient specter of “public anger” over last year’s executive bonuses. From an Associated Press news article on the subject, we read:
The tax, which would require congressional approval, would last at least 10 years and generate about $90 billion over the decade, according to administration estimates. “If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers,” Obama said.
… The proposed 0.15 percent tax on the liabilities of large financial institutions would apply only to those companies with assets of more than $50 billion—a group estimated at about 50. Administration officials estimate that 60 percent of the revenue would come from the 10 biggest ones.
We’ll choose to ignore Obama’s ironic crack that, were the money to be repaid, it would go to the taxpayers. After all, last I checked, the $338 million repaid by four small banks in March did nothing to enlarge my bank account nor will it reduce my tax burden by a single cent this coming April. But that’s not the aspect of the president’s comments upon which I want to focus, since the real issue is the obvious smokescreen of Obama’s feigned “we want our money back” plea.
Although Obama invokes the TARP loans, several of the 10 richest banks in America have already managed to repay that money. For instance, JPMorgan and State Street both paid off their debt in full last summer. But consider the math of Obama’s scheme, wherein sixty percent of the estimated $90 billion (over 10 years) in revenue is predicted to come from the top 10 richest banks. That means that the new tax, while supposedly justified by the outstanding TARP loans, will saddle banks like JPMorgan with up to $5.4 billion in taxes.
Contrary to the president’s rhetoric, an April, 2009 Wall Street Journal article offers evidence that Obama’s new taxation plan is not genuinely motivated by reclaiming TARP money. In the article, author Stuart Varney tells of a “prominent and profitable bank” which was forced to accept less than $1 billion in TARP loans. As of last year, the chairman wanted to repay the money with interest, but his request was denied by Obama’s administration because of the bank’s prominence. Varney claims this was done so Obama could maintain direct control of the banks.
Considering this story, is it really believable that less than a year later Obama has developed pure motives for his sudden crusade to reclaim the so-called “taxpayers’ money”? Please don’t misunderstand me. Not only do I think the banks should repay the TARP money in full, but I believe the so-called “loans” should never have been made in the first place. In this case I believe Obama is attempting to manipulate public sentiment (as politicians are wont to do) to garner support and justification for yet another statist “tax the rich” scheme.
The federal government is certainly in much worse financial condition this year than it was even last. The self-professed “peace candidate” is demanding a record $708 billion in Defense Department funding, plus an extra $33 billion to expand the Sisyphean military operation in Afghanistan, while his minions at the Treasury Department have just reported the Feds are essentially on track to surpass last year’s incredible $1.4 trillion deficit by up to $114 billion. Having achieved the impossible and gotten himself into a worse financial bind than his bungling predecessor, the timing is undeniably ripe for Obama to begin locating fat new sheep to fleece.
However, while Obama does need increased funding to continue enacting his crackpot policies, he doesn’t want that money entering the federal coffers in the form of TARP loan repayments. Allowing the prominent (that is, rich) banks off the hook that easily doesn’t fit into the president’s plans. Refusing repayment allows Obama to keep his fingers in the pie, giving him authority to practically dictate orders to the leading banks and enact his brand of “change” by fiat rather than Congress. Furthermore, while I merely speculate, by ensuring the banks all still owe him a “favor,” Obama potentially retains their indefinite political support. It would be interesting to see if there is some publicly accessible material proof of that theory.
The point is that while Obama does need yet another new source of funding, he desperately wants to avoid losing his unique control of America’s banks. Apparently, he believes the solution is to burden the top-50 richest banks with a new tax. Using this method, Obama can trick the taxpayers into supporting him by deliberately but indirectly misdefining the tax as a repayment of TARP loans. Thus he calms public concern over whether the loans will be repaid without actually giving up his debt-induced control over the country’s financial institutions. As per usual, this underhanded government “fix” will quite possibly create an unpleasant, if presumably unintended, side-effect. In this case, Obama runs the risk of causing greater financial setbacks for the banks by increasing taxation than if he simply allowed them to immediately repay their debts.
If the tax is passed, banks will be responsible for a new tax for years to come in addition to the prospect of still having to eventually repay their TARP loans. Banks such as the one mentioned by Varney, which at least were in strong enough shape to weather the hit of paying off their debt, will find this proposed tax to be a cancer which their weakened immune systems may not be capable of enduring. Because of the reduced liquidity caused by Obama’s new tax, banks will need to become even more risk averse in their lending practices. Yet congressional overregulation and fiat passed down from the string-puller-in-chief preclude them from doing just that, almost guaranteeing that they will ultimately beg Obama to perpetuate his central control in return for another bailout. Of course, the blame for all this lies with the banks, which dug the original hole by accepting government aid in the first place. Regardless, that does not excuse Obama taking advantage of the situation to expand on the Bush regime’s fascist merger of business and government.
This is an excellent demonstration of the deceptive methods used by politicians. That odious breed invariably latches on to the cause du jour, in this case anti-bank public anger, using it as a means of excusing new draconian policies. Inept politicians like Bush can’t always pull this off without drawing the ire of the majority of voters, but some politicians who expertly mask their true intentions behind popular rhetoric have the ability to implement repressive policy to the cheers of the public. Naively, the public imagines such policies will only negatively impact the current enemy of the state, in this case the bankers.
History proves that this strategy can be effectively employed time and time again. The pattern is best represented in a quote attributed to Groucho Marx, who said: “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.” In our case, the country’s politicians actually created the trouble through Federal Reserve regulation that led to the housing bubble and the bank crisis. Misdiagnosing the very problem they created as the result of “capitalist excess,” political leaders like Obama (and Bush) have responded by using countrywide financial suffering to justify seizing unprecedented levels of control over American business, particularly the banks. Of course, this ludicrously wrong remedy merely perpetuates the cause of the original trouble.
As I conclude, one question we should all be asking is how much of this trouble was created deliberately. Certainly, as the old adage goes, we should never ascribe to malice what can be explained by stupidity, a mental affliction which has practically reached epidemic levels inside the Capital Beltway. Yet there still remain a few savvy and unarguably malicious politicians who are not above intentionally orchestrating a national crisis so as to create a situation where the public begs them to overstep their natural boundaries by seizing some form of “emergency” powers. Although American citizens will suffer at the hands of either political force, a malicious one will prove far more difficult to uproot.