The good news just keeps coming. The taxpayers are going to recoup the billions of dollars expended to rescue the banks through a new “financial crisis responsibility fee.” This “fee” will supposedly be paid to the government by those responsible for the recent economic crisis – the bankers.
According to a White House press release, President Obama wants to “recover every single dime the American people are owed.” The President said his determination to do this “is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people.”
Firms like Freddie Mac and Fannie Mae? Both received billions of dollars in TARP funds - $50.7 billion and $59.9 billion respectively - but the Treasury Department recently approved giving millions of dollars in bonuses to the heads of those corporations.
Those two agencies, which packaged mortgages and sold them to investors who believed the securities to be almost as safe as government bonds, are exempt from the “financial crisis responsibility fee.” In fact, instead of trying to recoup taxpayer investment, the administration has decided to lift the loss caps on those two institutions and let them siphon off as much taxpayer money as they like. The losses had previously been capped at $200 billion. Now they have unlimited access to taxpayer money. That will surely teach them financial responsibility.
And what about recouping taxpayer investment in General Motors ($50.4 billion) and Chrysler ($12.5 billion)? They owe their continued existence to the American people and have not even begun to repay their debt.
I suppose the “fat cat” bankers are an easy target. However, even if we pretend for a moment that the financial crisis was not the direct and inevitable result of government interference in banking to begin with, there is simply no way Obama’s proposed fee will be paid by anyone other than the American consumer.
The fee or TARP tax, as it is more appropriately called, will be levied against banks, insurers and brokerages with over $50 billion in assets. The TARP tax will be calculated as a percentage of the liabilities such as derivatives, collateralized debt obligations or credit default swaps held by those firms.
An administration official, in an unbelievably naive or incredibly stupid statement, said this tax will not be passed along to consumers.
Every tax or fee levied against businesses is ultimately passed along to the consumer. Everybody knows this - even Democrats, yet they are supporting this nonsensical proposal anyway.
Just last month, President Obama lectured bankers because they were not lending enough. Increasing the cost of business for a bank by imposing new taxes is not going to do anything to improve that situation.
Even banks that have repaid their TARP loans or ones that never took government money in the first place will be subjected to the tax. The administration justified this by saying all major financial institutions benefitted from efforts to stabilize the financial system. Using that rationale, you could levy the tax against just about everybody.
This “financial responsibility fee” is nothing more than a capricious tax designed to swell government coffers while not returning a dime to the taxpayers who will be forced to bear the cost. Playing on populist sentiment against bankers is no excuse for bad and economically harmful policy making.
Kristi Reed is a reporter for the Barrow Journal. She can be reached at firstname.lastname@example.org.
You contend the banking failure was caused by government interference, probably by democrats no less; however, the republicans were in total control for four years and could have fixed any issues they felt were government interference. The issues with banking and development were a lack of managing supply and demand in the housing market by those industries. Profits were too important to be stymied by monitoring the market economy. The government was correct in it’s propping of the financial markets, and should take some precautionary measures to protect the tax payers. A pure market economy will always be undermined by the few greedy that plunder the available resources.
It was hardly government interference that caused the failure of banks. It was the policies of that alleged conservative and definite Republican George Bush. He permitted the banks and corporations to run wild, which has contributed to increased medical costs and more uninsured Americans He also cut taxes while not reducing spending. Result: increased deficit. He pushed through a prescription drug welfare bill without paying for it. Result: Increased deficit. He waged a needless war in Iraq costing billions. Result: increased deficit. Yeah, let's get rid of those free-spending liberals and get more good ol' Republicans.
"And what about recouping taxpayer investment in General Motors ($50.4 billion) and Chrysler ($12.5 billion)? They owe their continued existence to the American people and have not even begun to repay their debt."
Actually - they have. GM has already paid 1 Billion back in December.