An all-night House-Senate conference committee delivered President Barack Obama and Democrats a far-reaching and historic achievement Friday – a realignment of the rules that govern Wall Street and a second victory toward Obama’s legislative triple crown.
The compromise bill now goes to the House and Senate for approval. For all the messiness of the process, financial reform and March’s health care reform win cumulatively make clear Obama and Democrats are governing in consequential ways – and once again Friday, without a single Republican vote. The results make clear the argument over Obama is no longer whether he’s effective or not, but whether voters will like the results.
The agreement came at 5:39 a.m., after 20 straight hours of work in the committee, a marathon session that tested the negotiating skills, patience and endurance of several dozen lawmakers tasked with reconciling two competing approaches to reining in Wall Street.
But it left no doubt about the mark Obama has left on his twin Democratic majorities in Congress – reluctant, even recalcitrant at times, but in the end, doing his bidding to remake two of the most important sectors of the U.S. economy.
His hoped-for third act – a wide-ranging climate change and energy bill – is next on Obama’s docket, and absent these successes, it would be easy to believe there was simply no way he could bend Congress to his will yet again, with midterms looming, poll numbers sagging and the nation’s financial coffers tapped out.
But Obama plans to press his advantage – to try to salvage one more legislative win out of the depths of the BP oil spill tragedy. He’s invited what amounts to the bipartisan Senate climate caucus to the White House Tuesday to plot out a way ahead.
The House Financial Services Committee voted Wednesday to launch an investigation of the ShoreBank bailout, a scandal that was first revealed here at BigGovernment.com. Of the dozens of banks that have failed this year, only ShoreBank received help from Washington and Wall Street. The reasons: its connections to the White House, its close relationship with Rep. Jan Schakowsky (D-IL), and its importance to the radical left.
After I broke the story in January, other bloggers, notably the Central Illinois 9/12 project, connected more of the dots. Soon, the Wall Street Journal, the Chicago Tribune, and even the New York Times began following the story. Two weeks ago, my campaign joined Rev. Isaac Hayes (who is challenging Jesse Jackson, Jr. in IL-2) and the Illinois Tea Party in a spirited protest outside ShoreBank’s offices on LaSalle Street in downtown Chicago.
Representatives Judy Biggert (R-IL) and Darrell Issa (R-CA) took up the cause and demanded answers about the White House’s role. Suddenly, the Treasury and the Federal Reserve began backing away from the bailout. That triggered a public attack on Treasury secretary Tim Geithner by the Illinois Finance Authority. Finally, Rep. Biggert succeeded in inserting an investigation of ShoreBank into the financial reform bill.
The financial reform bill is still a job-killer. But if it does pass, the consolation is that Congress will investigate the ShoreBank bailout. The fact that a bipartisan committee managed to agree on the investigation shows how important the allegations are.
Meanwhile, the ShoreBank bailout is still on hold. Thanks to bloggers, the much-maligned Tea Party, and bold leadership on Capitol Hill, we have stopped a corrupt bailout, against overwhelming odds!
Representative Tom McClintock delivered the following remarks in the House of Representatives in opposition to H.R. 5297. The bill will be voted on by the House.
House Chamber, Washington, D.C. M. Speaker:
The proponents tell us that this bill will increase lending to small businesses. To do so they are creating a $30 billion slush fund to make loans to smaller banks, therefore encouraging smaller banks to make loans to small businesses. Or so they say.
It is a splendid example of what I like to call McClintock’s Second Law of Political Physics: the more we invest in our mistakes, the less willing we are to correct them.
It’s apparently escaped the proponents’ attention that we are already doing precisely what the proposed new small business lending fund would do through the TARP’s existing Capital Purchase Program.
That’s the conclusion of the Special Inspector General of TARP, Neil Barofsky. He wrote to the Financial Services Committee on May 17th and said: “in terms of its basic design, its participants, its application process, and perhaps, its funding source from an oversight perspective, the (Small Business Lending Fund) would essentially be an extension of TARP’s (Capital Purchase Program).”
So if this scheme actually worked, we wouldn’t need this bill – banks would already be lending like crazy. The problem is, it doesn’t work. But some members can’t bear to face the American people and admit that they’ve squandered billions of dollars of working families’ hard-earned money. So instead they bring us more of the same.
This places an additional $30 billion of taxpayer money at risk. We’re told, don’t worry, we’ll get the money back.
When have we heard this song before? Oh yes, when they bailed out Fannie Mae and Freddie Mac. According to the Congressional Budget Office, taxpayers have now lost $145 billion heading to $400 billion.
What’s likely to happen to the $30 billion put at risk in this bill? Those banks with sound finances won’t touch this money – they don’t need it and they don’t need the federal entanglements that come with it.
Only those banks with unsound finances will accept these funds, with little chance they will ever be repaid. In fact, by removing the Special Inspector General from oversight of these funds, that risk is further aggravated.
And just to be clear, there is no guarantee that a dime of this money will actually be lent to small businesses in the first place – in fact, ANY commercial or industrial loan will count towards the requirements of this bill.
After a failed $700 billion TARP, $30 billion might not sound like much. But let’s put it in perspective – the combined cleanup and economic costs of the Gulf Oil Spill are currently estimated around $17 billion. So in terms of economic damage, this bill could actually cost more than cleaning up the entire mess in the Gulf.
It’s true that small businesses are having great difficulty getting loans. So are homebuyers. Why is that?
I suspect one of the principal reasons is that unprecedented public-sector borrowing has crowded out the capital pool that would otherwise have been available to make these private-sector loans.
Under this administration and this Congress, the government is running a 1 ½ TRILLION dollar annual deficit. That’s roughly $20,000 for every family of four in America.
Where does that money come from? We borrow it. From whom do we borrow it? We borrow it from the same capital pool that would otherwise have been available to loan to small businesses and other employers seeking to add jobs, or loan to homebuyers seeking to re-enter the housing market, or to loan to consumers seeking to afford consumer purchases – and remember that two thirds of economic growth depends upon consumer spending.
But that money now isn’t available to loan to employers and homebuyers and consumers to expand the economy – because government has borrowed it in order to expand government.
That is the core of the problem. I had offered an amendment to forbid the use of this TARP III money in the presence of a deficit – for a very simple reason. If the government borrows that money to loan to one small business, that same money won’t be there to loan to another one.
Government cannot inject a single dollar into the economy that it has not first taken out of the very same economy.
But of course, this amendment was forbidden under the rule we are now considering.
Therefore, I oppose the rule and I oppose the underlying bill.
Remember all of those bold statements that the so called “Troubled Assets Relief Program” (TARP), the Bailout of Wall Street Bill, was a one time deal and our federal government should and will never do it again. Secretary of the Treasury Tim Geithner testified in January of this year before the House Committee on Oversight and Government Reform:
Many Americans look at what happened with AIG, and the rest of the financial rescue, and simply ask: Why was it necessary? Why was it fair for the government to take taxpayer money and put it into an institution that had mismanaged itself to the edge of collapse? The answer is that it was not fair, and it was not something our government should ever have to do. But those Americans, those families and business owners who played by the rules and played no role in giving rise to this recession, should understand that if the government had failed to act, that failure would have unleashed substantially greater damage upon them.
If TARP “was not fair” and not “something our government should ever have to do,” then why is Congress trying to impose the TARP model on small business? Congress will consider legislation this week to establish TARP, Jr. for small businesses to be administered and run by none other than Secretary of the Treasury Tim Geithner. The House is considering H.R. 5297, the Small Business Lending Fund Act that provides “temporary authority to the Secretary of the Treasury to make capital investments to eligible institutions in order to increase the availability of credit for small businesses.”
The legislation creates a federally run new bureaucracy called the “Small Business Lending Fund. ” To qualify a financial institution has to have less than $10 billion in assets and the new creation would have up to $30 billion in new investment authority. This allegedly temporary program is set up “without further appropriation of fiscal year limitation,” i.e. not temporary, to purchase “preferred stock and other financial instruments” from small business as a means to infuse money into local banks with the condition that they lend to failing small business. Local banks will be lending in exchange for equity small business, therefore these banks will be using federal monies to buy equity in companies. This is an idea born from socialism and one that will harm the free market for small business, because failure will be rewarded by federal subsidies while success will be punished.
The bill also creates a “Small Business Credit Initiative” with $2 billion of your tax dollars to be given to states that have created programs to provide funds to banks to bailout small businesses in trouble. This would provide an incentive for states to adopt the crony capitalism programs of the federal government exemplified by the federal takeover of General Motors and the activities of Fannie Mae and Freddie Mac. Setting up a system with private profits, yet socialized losses, will diminish capitalism and the American free market system. This legislation, TARP, Jr., extends the failed and free market offensive TARP model to small business. Considering that the original TARP program was “not fair, and it was not something our government should ever have to do,” Congress might want to heed the advice of Secretary Geithner of January 2010 and pause before creeping a few more steps toward American socialism.
When Washington opened the doors to taxpayer bailouts of Wall Street firms they set off a modern day gold rush for lobbyists, corporations and unions looking to get their piece of the pie. The car companies lined up for their handout. Big labor and their failed underfunded pensions are angling for bailouts. And now major retailers like Walmart and oil companies like British Petroleum are lobbying for their government created wealth transfer payment. Welcome to the world of the Durbin Amendment to the Financial Reform bill — a new bailout attached to a giant bailout bill.
A coalition of lobbyists for oil and gas companies, convenience stores, giant retailers and petroleum marketers have conned Senators into supporting a provision that is tantamount to a bailout for perfectly profitable multi-billion corporations.
There was a time when a business was looking to cut costs, they would tighten their belt and make changes within their company to ensure profitability. No longer. Now companies hire Washington lobbyists who push schemes to shift costs from the company to other companies, or worse yet, the consumer. That is exactly what the Durbin amendment to the Financial Reform bill is all about.
When giant corporations like BP and Walmart accept payment via credit cards, they pay a fee for processing services. The Durbin amendment empowers the Fed to cap the cost of those services to these industry giants. Proponents of the so-called “swipe fee” amendment have cynically argued that this amendment would somehow benefit consumers. But in reality, the Durbin amendment is a lobbyist-written, government imposed price control program that will shift the cost of accepting credit cards from mega corporations to consumers.
Writing in the Washington Times, Todd Zywicki explains:
This means, inevitably, costs will be shifted from merchants to consumers. Consumers will see new fees or greater restrictions on their use of debit cards – reminiscent of times past when banks imposed a limit on the number of free debit transactions a consumer was permitted in a given month, after which consumers had to pay a fee. Consumers can also expect to see deterioration in customer service and investments in security, and efforts by banks to cross-subsidize debit card transactions through other bank services. Issuers may also try to steer consumers toward greater use of credit cards, whose interchange fees – although generally higher than those on debit cards – are not regulated by the Durbin amendment. Moreover, while the Durbin amendment excludes banks with assets of less than $10 billion from its price control regulations, payment card networks will be forced by competitive pressures to equalize its interchange fees across its various issuers, thereby nullifying this purported safe harbor for small issuers and their customers.
Having successfully duped the Senate in to passing the Amendment, the major beneficiaries are pushing the conference committee to accept the Durbin amendment. BP, Conoco, Exxon, WalMart and Best Buy are all working the Hill to ensure the costs of processing credit cards are moved from their books to the books of others. But rather than using the marketplace to set the price, they are asking government to do it. Passing the Durbin amendment into law would be the shameful equivalent of handing these mega corporations a check.
By now, readers of BigGovernment.com know that that the Democrats “Wall Street Bank” bill, which may get a final vote as early as this week, will reach far beyond Wall Street and ensnare businesses not typically thought of as “banks.” Stories here by this author and others have laid bare provisions of the Obama-Dodd-Frank-Everything’s-A-Bank bill that broadly define a “financial company” as any business “substantially engaged” or “significantly engaged” in financial activities. And if your business happens to fall in such a category, it could be subject to a bailout “assessment” tax to bail out a high rolling financial firm, intrusive regulation by a banking agency or the new Bureau of Consumer Financial Protection, or even outright nationalization if the troika of the Federal Reserve, Treasury Secretary, and Federal Deposit Insurance Corporation decide your firm is a threat to “financial stability.”
Trouble is, though its audience is growing by leaps and bounds every day, this site is still at the point in which not every American relies on it for essential political info. And because Republicans have done a mediocre job of explaining how far this bill would reach, and the establishment media largely has no interest in explaining these facts, supporters of Senate Banking Committee Chairman Chris Dodd’s “Restoring American Financial Stability Act” have been able to get away with saying, “If you’re against this bill, you’re against reform of Wall Street.”
Or at least, that was the case until a couple days ago. That’s when Sen. David Vitter (R-La.) introduced an amendment with a straightforward message: A bill that claims to be about fostering transparency on Wall Street should itself be transparent in its objective and not sneak regulation on Main Street manufacturers and retailers. Call it (and I just did) the Not-Everything’s-A-Bank Amendment.
Vitter has distinguished himself with his dedicated efforts in fighting for real financial reform. He co-sponsored with self-proclaimed (but not necessarily sole) Senate socialist Bernie Sanders (I-Vt.)a bipartisan amendment similar to the measure in the House bill to have the Government Accountability Office audit the Federal Reserve. When Sanders and others went for the Obama administration”compromise” of a one-time audit of a limited part of the Fed’s operation, Vitter carried the flag of Fed transparency.
Vitter’s new amendment provides similar sunshine the bill’s supposed reform efforts. It changes the vague language in Dodd’s current bill that would enable Federal Reserve supervision of any firm “substantially engaged in activities in the United States that are financial in nature” to the stricter “predominantly engaged.” And this amendment precisely defines “predominantly engaged” as a business that makes no less than 85 percent of its revenue from financial activities.
“I have a huge concern about the bill overall allowing the government to grab control of the economy,” Vitter told the Wall Street Journal. “I’m looking for ways to appropriately limit that.”
The amendment serves two noble purposes. If it passes, of course, it will ensure new financial rules, however onerous they are, will only be directed at truly financial companies – not be used as an excuse for back-door control of firms the government wants to target for whatever reason. And the second purpose it serves is just to end the progressives’ rhetorical shell game.
And quite frankly, it is driving the Left nuts. After weeks of castigating critics of the bill as favoring Wall Street over Main Street, suddenly in opposing Vitter’s amendment, progressives are forced to explain why they favor such intrusive regulation over Main Street businesses that had nothing to do with the crisis. And they are tying themselves in knots trying to do so.
Take a look at this tortured defense of the Dodd bill’s broad “financial company” definition from the Huffington Post. “The Vitter amendment must be defeated,” writes Jane D’Arista, who is with some entity called SAFER — (Economists’ Committee for Stable, Accountable, Fair and Efficient Financial Reform) She tries to explain that “replacing ‘substantially’ with ‘predominantly’ to define the level of financial activity permitted for non-financial firms may seem like no more than a relatively small change in wording. In reality, it is a change that threatens to erase those structural elements that have ensured a fair, open and competitive US financial system.”
Got that?! I think what she’s trying to say is that to ensure “a competitive U.S. financial system,” we have to treat a variety of businesses just like banks. Oh, okay. Interestingly, the article has been up for two days on HuffPo with zero comments. D’Arista’s logic – or lack of it – seems to have left the site’s readers speechless – for once.
So the new smear tactic is to accuse Vitter of carrying water for none other than General Electric, parent company of HuffPo’s favorite cable news network, which has subsidiaries that engage in a lot of genuine financial actvities “GE Wants To Be Saved From Reform Bill,” blares the front page of HuffPo as of this writing. “GE and other manufacturers back exemption in financial regulation bill” screams a headline in the Washington Post.
Yes, you see, apparently staunch conservative Vitter has introduced an amendment solely to benefit a company whose cable network blast Republicans and Tea Partiers, whose lobbyists press for cap-and-trade, and whose CEO showers praise on President Obama. Makes perfect sense!
And then there’s just one minor thing. GE Capital already owns two federally insured banks. That’s how, as ProPublica explains, it qualified for the FDIC’s Temporary Liquidity Guarantee Program in 2008. Any bank falls under banking regulators, and to the extent its transactions with the parent company poses risks to the deposit insurance fund, the parent company does as well.
Plus, GE Capital as a finance subsidiary would more than meet Vitter’s 85 percent. This is something that the Washington Post story, despite its headline, more or less admits if the reader is patient enough to wade halfway through the article. “The subsidiary company could still come under scrutiny,” the article points out.
If anything, to draw from Washington Examiner columnist Timothy P. Carney’s illustrations of big business and regulation, GE would benefit from having its smaller manufacturing rivals being forced to comply with banking regulations it already has to comply with. GE serves the same purpose for progressives in trying to defeat the Vitter amendment as Goldman Sachs served in ramming the bill through: a useful decoy that in reality stands to benefit from the bill at large.
As early as today, a vote may be called on cloture to end debate and have a vote on the final bill. Cloture to end debate takes 60 votes, and it represents the Senate Republicans last shot at stopping this destructive bill or making it better, although each House will likely have to vote on some version of the bill again, and the House –Senate conference may take longer than expected, giving critics of the bill some additional time to make their case.
There are many reasons for the GOP and truly moderate Democrats in the Senate not to grant cloture. Even if the bill was primarily concerned with Wall Street, it still does nothing about Fannie and Freddie, But making sure the Wall Street bill is actually about Wall Street – or at the very least about banks – should be a line in the sand.
There should this firm message. “No Vitter amendment. No cloture. No dice!”
It takes a special ad to get a candidate for Senate so upset they hire lawyers to censor it. But that is what is happening in Illinois as the Alexi Giannoulias campaign has unleashed its lawyers on television stations who have been carrying this ad:
The facts of the ad are indisputable but not to Alexi Giannoulias and his trial lawyer buddies. They sent this letter to the stations demanding censorship because they claim the FDIC bailout of the Giannoulias family owned bank was not a “bailout.”
The Giannoulias family bank — Broadway Bank — used its depositors money to loan money to the mob characters and fugitives of the law. Those benefiting from the lending practices of the Giannoulias family include Boris Stratievsky, a fugitive of the law who built a money laundering network received received more than $10 million from Broadway Bank. Giannoulias bankrolled Michael ‘Jaws’ Giorango, a Chicagoan twice convicted of bookmaking and promoting prostitution.
It’s little surprise that the Broadway bank failed, needing the FDIC to come in and rescue depositors money. That, my friends, is a bailout. Without the help of the Feds, depositors would have been ruined.
Comcast Chicago has blinked and are refusing to run the ad. Whether citizens ever get to see this ad, one thing is for sure, the Giannoulias campaign has made a fatal error by entering this debate. They have given the ad more attention that it might have gotten and they have awakened Illinois citizens about the scandal.
Thanks to provisions buried within the Obama/Dodd financial deform bill, your personal information — from ATM withdrawals to loans — will now be collected by the federal government with no protections to your personal privacy.
The legislation creates another federal bureaucracy — the Consumer Financial Protection Bureau (CFPB) that is nothing more than a systematic government invasion of your personal finances of every consumer creating a financial fingerprint for the government to watch over.
Dodd’s bill deputizes the CFPB to act as a new federal watchdog agency to collect consumers’ personal financial information and transactions including records from Automatic Teller Machines from any financial institution or firm.
Don’t believe us — read the bill.
Section 1022 – Under Dodd’s bill the CFPB is granted unprecedented power to write, administer and enforce federal consumer financial law with no Congressional oversight.
Section 1071 – Dodd’s bill compels financial institutions like banks, credit unions and stock brokerage firms to maintain records of all financial transactions including the number and dollar amount and to submit that information to the CFPB.
Perhaps the worst aspect of the bill is it leaves it up to the discretion of the CFPB bureaucrats to determine how to use the personal information collected on American consumers and to share that data with other Federal agencies as it sees fit.
The Dodd bill constitutes an unprecedented intrusion into the privacy of the American people. For this reason alone, it deserves to be defeated.
Today it was reported that Goldman Sachs CEO Lloyd Blankfein has been calling Wall Street friends to cough up $125 million to save ShoreBank, which faces federal closure next week. Rep. Jan Schakowsky suggested in January that Illinois taxpayers foot the bill. That would have been the first state-led bank bailout in U.S history. The idea was abandoned–so it appears the government is shaking down Goldman Sachs instead.
ShoreBank has close connections to the Obama administration, including controversial figures such as former “green jobs czar” Van Jones. Its executives have contributed in the past to Rep. Schakowsky and other Illinois politicians. ShoreBank did not just make loans in poor communities–there are other local banks that do that without getting into trouble–but also specifically made loans that the recipients had little hope of repaying.
Now ShoreBank is calling in some political favors, and the politicians are responding with a classic Chicago-style shakedown. It is probably no coincidence that Goldman Sachs suddenly took an interest in ShoreBank after it was slapped with a federal civil fraud lawsuit and a criminal investigation. Many Wall Street observers believe that the charges against Goldman Sachs were politically motivated, in timing if not in substance.
Regardless, Mr. Blankfein got the message, telling Goldman Sachs shareholders last week that he would try to rebuild the company’s image. He called up other bailed-out institutions that are being threatened with federal charges–Bank of America, Citigroup, and JP Morgan Chase–and got them to cough up millions for ShoreBank. So although the ShoreBank bailout is “private,” American taxpayers are still indirectly on the hook.
Rep. Schakowsky played her own part in the shakedown. She chewed out Goldman Sachs executives in her office, and then boasted about it at the Huffington Post. She warned them:
“You are looking at one of the 57 members who voted against the repeal of Glass-Stiegel [sic] in 1999.”
Regardless of their views of the Glass-Steagall Act, the executives at Goldman Sachs got a first-hard lesson in Chicago-style management.By bailing out ShoreBank, Goldman Sachs and the other banks may hope to appease Rep. Schakowsky and the administration–and to meet their obligations under the Community Reinvestment Act (CRA) of 1977, a law that set the stage for the sub-prime crisis. Wall Street is learning that complying with the CRA does not mean actually helping working families, but bailing out politically-favored institutions like ShoreBank.
It is telling that Rep. Schakowsky did not stop the closure of community banks that are based in the district she represents, like the Bank of Lincolnwood, which failed last year. The irony is that Goldman Sachs and other bailed-out institutions will be protected by the financial reform bill, which does not fully end “too big to fail.” If spending $125 million on ShoreBank is the price of membership in the club, they’re apparently ready to pay.
Sen. Bob Bennett suffered a stunning defeat in his quest for re-election Saturday. And as the Senate considers the Obama/Dodd financial ‘reform’ bill, other Senators should be asking themselves if they want to be next.
Bennett, representing the most conservative state in the country, was defeated for a number of reasons but none more obvious that his steadfast support for the Wall Street Bailout. When it came to his vote for the first Bush bailout, Bennett didn’t give an inch defending it all the way to his concession speech.
As political prognosticators read the tea leaves, a CNN interview with a local Tea Party activist perhaps provides the most insightful commentary. It could not be clearer, grass roots conservatives see support of bailouts as anathema to free market principles; period. Politicians have now been formally warned — support for bailouts of corporations and big banks is political suicide.
The real question is — is anyone listening. The Senate is considering a bailout bill that makes the TARP vote that defeated Sen. Bennett look like chump change. Sen. Corker, Collins and Grassley pay close attention here. The Obama/Dodd bill is a bailout bill that favors big banks and Wall Street over Main Street. It’s no different than supporting TARP — just more expensive and now contains a laundry list of intrusive Big Brother provisions like a national database that tracks citizens’ deposits and withdrawals.
And the bill is getting worse by the minute. Sen. Kay Hagan is preparing an amendment that will create another national database to track and approve or disapprove individual installment loans. Yes, you heard that right. Under the Hagan amendment, individual citizens would need the approval of the Federal government before taking out an installment loan.
Hagan’s amendment would limit consumers to no more than six and as few as one loan per year during a 12-month period for “covered” loans which include even some retail company credit plans. So for example, if a consumer uses Home Depot’s installment plan to buy a washing machine, he better pray the dishwasher doesn’t break because under Hagan’s amendment our consumer may not be able to buy a dishwasher (or anything else) for 275 days.
Of course, Hagan’s amendment exempts big banks and “traditional lenders” from these provisions.
Federalism has been so decimated that U.S. Senators apparently have no second thoughts enacting such an amendment. But Bennett’s ouster should give every member of the US Senate pause. Bennett may have represented a conservative state but support for bailouts has been clearly opposed by the majority of the electorate from across the political spectrum. Voting for the Financial Reform bill is like voting for TARP all over again — even worse.
The Democrats’ health care takeover didn’t stop with ObamaCare and there are some hurtful provisions in the new financial regulation bill Americans should know about if they have any expensive dental procedures coming up.
For millions of American teenagers braces are an embarrassing rite of passage, and for their parents, a tremendous cost. According to bracesinfo.com, the average prices of straightening a teenager’s teeth is about $5,400. In South Carolina, where themedian family income is approximately $45,000, the cost of braces for one child can total more than 10 percent of a parent’s gross income for the year.
Because braces are so expensive, many families pay for them through an installment agreement with their dentist. This is often a fair and affordable option that allows families to avoid charging the expense on their credit card and paying double-digit interest rates.
But the Democrats in Washington are clamping down on health care payment plans with the banking bill. As the bill is currently written, health care providers, or any other business that allows customers to make payments in more than four installments or assesses any kind of late fees, will be treated under the same terms as AIG, Freddie Mac and Goldman Sachs. A new Consumer Financial Protection Agency, housed in the Federal Reserve, will regulate their transactions and could subject them to further regulatory burden.
The banking regulation bill was supposed to crack down on Wall Street, but it’s just another power grab that’s going to hurt Main Street doctors, dentists and small-town businesses. And, certainly the families who struggle to find ways to pay for their doctor bills.
For many Americans who cannot go without a certain procedure, this bill will simply eliminate an affordable payment option and force those same individuals to put their bills on credit cards with high interest rates.
The banking bill, that runs more than 1,500 pages, is another massive, ill-advised piece of legislation being rushed through by the Democrats that’s full of unhappy surprises for the American people. Democrats have slapped the label of “reform” on this bill, but its contents don’t live up to the label. Punishing dentists and kids who need braces isn’t going to reform Wall Street one bit. In fact, it’s a good reason to oppose this bill.
Despite the populist rhetoric and anti-bank bank posture, a look behind the curtain of the Wall Street Reform bill reveals nothing more than self-interest, business as usual and more power and influence to Wall Street instead of the free market. And as if the permanent bailouts and too big to fail advantages already in the Obama Dodd bill aren’t enough for the greedy banks, a proposed amendment offered by former Bank of America executive Sen. Kay Hagen is a perfect case and point.
Hagen’s amendment proposes to “protect consumers” from lenders whose market includes lower and middle class Americans — the type of folk that Bank of America wouldn’t lend a dollar to — despite trillions in federal support.
These loans, often called “payday loans,” provide short-term cash to Americans who need money to repair their car, fix their house, even pay a medical bill, while they wait for payday to payback the loan. The Hagen amendment would limit competition for the big boys at Bank of America but allow consumers to take cash advances from their credit cards.
The Hagan amendment does not protect consumers from outrageous and exorbitant fees that Bank of America charges consumers. In fact, its actually going to cost consumers more in fees. A Bank of America customer with a two-week overdraft of $66 results in a $30 fee — an APR of 1,165%! In fact, last year Wall Street banks charged consumers $38 billion in overdraft and NFS fees. And by putting the traditional short term lenders out of business, the Hagan amendment will force more strapped consumers to resort to paying overdraft fees that will earn big banks an additional $14 billion a year.
Its not surprising to find out that Sen. Hagan has received over $315,000 in political contributions from commercial banks and financial institutions including $19,000 from Bank of America.
Hagan is also carrying the water for the corrupt Center for Responsible Lending, the group who took $15 million from John Paulson, a key figure in the Goldman Sachs scandal. This money was used to undermine the subprime lending market that helped millions of Americans buy their first homes. While witnessing this, Hagan’s cronies reaped billions of dollars off of their bets against the American dream. The Center for Responsible Lending – author of the Hagan bill – was involved in a scheme with John Paulson and Senator Chuck Schumer to destroy IndyMac Bank that allowed Paulson to buy pieces of IndyMac at fire sale prices and collect billions for himself and his cronies.
Americans are smart enough to make informed financial decisions if know it all millionaire Senators will just let them.
Wall street wants it, unions want it, Obama wants it and now you can add at least one Communist filmmaker to the list of supporters of CFPA.
As thousands of union members converged on Wall Street last week, they were joined in solidarity by Kevin Keating. Keating, a cinematographer on the 1976 movie “Harlan County, U.S.A” and an unabashed communist joined his union brethren in demanding the Obama-Dodd financial takeover bill that would give unions greater ability to takeover the governing boards of companies and drain resources into their own coffers.
Small business and main street companies will suffer under the bill. But at least Obama and Dodd have the support and admiration of one very proud communist.
Wall street wants it, unions want it, Obama wants it and now you can add at least one Communist filmmaker to the list of supporters of CFPA.
As thousands of union members converged on Wall Street last week, they were joined in solidarity by Kevin Keating. Keating, a cinematographer on the 1976 movie “Harlan County, U.S.A” and an unabashed communist joined his union brethren in demanding the Obama-Dodd financial takeover bill that would give unions greater ability to takeover the governing boards of companies and drain resources into their own coffers.
Small business and main street companies will suffer under the bill. But at least Obama and Dodd have the support and admiration of one very proud communist.
It’s amazing to watch the civil libertarians hide when Democrats propose the most sweeping intrusions of privacy in generations. In addition to the litany of bad policies contained in the Dodd Financial Reform bill is this nugget on pages 1039-1040. In short, it extends government reach to every deposit account of every citizen.
Subtitle G of the Dodd discussion draft bill requires that records be maintained and reported “for each branch, automated teller machine at which deposits are accepted, and other deposit taking service facility with respect to any financial institution, the financial institution shall maintain a record of the number and dollar amounts of deposit accounts of customers.”
What’s worse, banks will be required to submit these records to the new super regulatory agency called the Consumer Financial Protection Agency (page 1041). The CFPA will be allowed to use this information for any purpose “as permitted by law” under CFPA rules—rules set by CFPA themselves.
So, lets get this straight—the law requires banks to snoop on its customers MOST PERSONAL INFORMATION and submit it to another government agency so it can be used anyway the CFPA see’s fit.
So, if the CFPA Czar see’s fit, information about your deposit account activity could be shared with the IRS, immigration officials, state officials, or any other entity that the Administration and their various Czar’s think beneficial.
But CFPA will impact your life even before they give away your personal data. Remember that part of the excuse for including this authority is to make policy recommendations. So, be careful not to run your credit limit too high above the amount of money you are depositing in the bank or the CFPA will know you can’t pay your bills and make the appropriate “policy recommendations”.
This is exactly why conservatives have fought so hard against things like national ID cards—if the government is authorized to collect and utilize data, there is no way to prevent the government as a whole or certain individuals within the government from using the information against the citizens.
But passage of the CFPA will settle the whole ID card thing once and for all. There will be no need for them because if you have a bank account, you already have a number and the CFPA will have it.
The breadth of sweeping new powers given to the federal government by these three pages is astonishing. Yet we have heard nary a peep about this provision.
After capitulation and surrender, Republicans will have a chance to amend the legislation when it comes to the floor of the Senate and protect the private details of your banking account.
But if they don’t, smile the next time you go to the ATM because Big Brother will be watching.
The more details that emerge about the Obama-Dodd financial “reform” bill, the worse it smells. The bill is most certainly an attempt to give the government vastly more power and control over the economy. And despite the vocal, condescending, even mocking protestations from Democrats and their allies, this bill does in fact contain unlimited bailout authority for the Fed. It’s right there in the bill for the world to see.
But it is increasingly evident that there may be something more sinister going on behind the scenes that is driving this debate. The President trotted up to New York to give a big televised speech and scolded Wall Street for “resisting reform” saying that if we are to prevent another crisis, we must pass his bill.
The whole charade amounted to little more than political theater. Big Wall Street banks actually WANT this bill. Executives for Citigroup and Goldman Sachs (two firms that both received bailout funds) have both made statements in favor of Obama’s financial reform bill.
So, one must ask, if this is so draconian on Wall Street, why do they want it so badly? The answer to this question is in the details of the bill: Not only does this bill not rein in big Wall Street banks, its actually a very big gift to Big Banks and other special interests—gifts that will cost Main Street, the taxpayers and consumers.
The large financial institutions at the root of the financial crisis wouldn’t even be regulated by the CFPA. Their oversight would remain at the porn-surfing Securities and Exchange Commission. But of course the bill is full of burdensome regulations for smaller institutions with which they will struggle to comply and also remain profitable. The larger banks that are covered will not only have the resources to adapt but will also likely grow even larger by swallowing up smaller institutions that can’t make it.
But big banks aren’t the only ones receiving special favors. Mark Calabria of the Cato Institute highlighted some egregious examples of special interests using this bill as a vehicle for their own desires in a recent NY Post article, saying:
Remember the mortgage crisis? Well, the primary consumer-protection law for homebuyers is the 1974 Real Estate Settlement Procedures Act. The law requires the timely, accurate disclosure of relevant closing costs and prohibits “kickbacks” for the steering of settlement services.
For example, your real-estate agent cannot, under RESPA, be paid a fee for steering you toward a certain home inspector, title company or other closing service. Yet, under the Dodd bill, real-estate agents would be exempted from RESPA. If that weren’t bad enough, the Dodd bill exempts insurers and attorneys — both now subject to RESPA — from its consumer protections, too.
So, the big banks are not only getting off scott-free, but they, real estate agents, title companies, lawyers and other special interests are attempting to further rig the system permanently in their favor.
And if all the advantages given to the banks in this bill still aren’t enough to help weather the consequences of their risky behavior? Well, that’s what the bailout language is for. The Barney Frank bill authorizes up to $4 trillion dollars in lending authority for the Fed. Dodd’s bill gives them a blank check with no limit.
But these gifts come at a cost. And the bailouts are only the down payment. The Obama-Dodd bill would give the government unprecedented reach into the business place and create real harms on Main Street.
Local community banks will be subject to at least 27 new regulations that could put many of them out of business.
Harley-Davidson is worried that its dealer-financed loans to bikers will fall victim to new federal financing regulations.
eBay may be harmed by restrictions on PayPal, a subsidiary, in moving money in the Internet marketplace.
Small businesses that rely on credit cards, small credit lines, home equity loans and other types of credit will lose access to these life lines that keep their businesses operating—and employing workers.
But, Wall Street gets the bill that it wants. And that’s what’s important right? Apparently it is for those pushing this bill.
Everyone wants to avoid a new financial crisis (except perhaps Goldman Sachs and John Paulson who made billions on it). But the manner in which that is done is crucial.
Rather than addressing the root causes of the crisis, this bill avoids them entirely. Rather than addressing the entities involved with causing the crisis, this bill rewards them and harms Main Street. Rather than doing away with too big to fail, this bill encourages risky behavior and makes big firms even bigger by rigging the system in their favor against community banks and other small lending institutions.
All of which is why Wall Street wants it so badly. Because as anyone who watched the Senate hearing with Goldman CEO Blankfein understands, Wall Street knows how to spot a “sh$%^y deal” so this one must be a sweetheart.
Yesterday, Republicans held firm against bailouts to big banks and Wall Street. They held firm against creation of a super regulatory bureaucracy. They held firm against a massive government intervention in our economy. All in all it was a good day.
But a word to the wise: DO NOT SNATCH DEFEAT FROM THE JAWS OF VICTORY.
Republican leaders have been making noises about a compromise measure for a week. Now is not the time to get weak.
The Democrats continue to deny the bill is a bailout. But they are slowing losing that battle.
NPR said:
“A vote for reform is a vote to put a stop to taxpayer-funded bailouts,” Obama said in his speech in New York on Thursday.
I cannot find any experts — of any party — who are willing to agree with Obama on this one.
“We’re not seeing a very forceful step on the too-big-to-fail problem,” said Carmen Reinhart, an economist at the University of Maryland. “If there’s any doubt that the crisis may be systemic, we will bail out again.”
So, if a major bank says, “Hey, save us or the economy will go under,” the government’s going to save the bank. Full stop.
The New York Times said:
Unfortunately, the leading proposals would do little to cure the epidemic unleashed on American taxpayers by the lords of finance and their bailout partners. The central problem is that neither the Senate nor House bills would chop down big banks to a more manageable and less threatening size. The bills also don’t eliminate the prospect of future bailouts of interconnected and powerful companies.
Too big to fail is alive and well, alas. Indeed, several aspects of the legislative proposals sanction and codify the special status conferred on institutions that are seen as systemically important. Instead of reducing the number of behemoth firms assigned this special status, the bills would encourage smaller companies to grow large and dangerous so that they, too, could have a seat at the bailout buffet.
But even without any bailouts, this bill is a behemoth that creates new bureacracies and empowers the government right down to the level of monitoring individual consumer’s transactions. This is a fight worth having. Republicans must hold the line. Democrats need to hear the message: American’s have had enough of bailouts, handouts and takeovers. The government is not the solution.
Let Dodd and Obama rattle the sabers. Republicans achieved a great win yesterday. Now, lets don’t win the war and lose the peace.
Sen. Chris Dodd’s financial regulatory reform bill, on which the Senate is slated to take a cloture vote this afternoon, has been the subject of much criticism of late, primarily for what opponents say amounts to a de facto institutionalization of “too big to fail” with regard to the biggest power players in the financial sector.
However, Capitol Confidential has learned that there is another, equally troubling aspect of the bill that observers say is going unnoticed in the debate surrounding Dodd’s proposals: Its hammering of community banks. Relatively small institutions compared to the names often cited in the news, community banks typically operate in small towns, urban neighborhoods or the suburbs. Their remit usually involves funding small businesses that require credit in order to operate payrolls and to expand, and lending to families financing home purchases or college. Many of those familiar with the banking industry, overall, say that community banks bore little to no responsibility, on balance, for the financial meltdown that occurred in 2008. Nonetheless, an analysis of the Dodd bill indicates that if it passes, community banks will be subject to a whopping 27 new regulations that one individual who has worked with banks professionally and is closely tracking the legislation says “could threaten to put many community bankers out of business, thus reducing competition in the banking sector overall, and diminishing consumer choices.”
That individual further asserts that while the bigger, Wall Street banks will likely be able to adapt to the bill (though their efficiency and ability to compete internationally could take a knock), the community banks will not—potentially making the system more risk-prone, also.
At some community banks, staff already work with what can be 1,000 pages or more of regulation with which they must comply daily. The Dodd bill would notably add to this, and observers say its 27 new regulations would, were the bill passed and signed into law, vastly increase administrative costs to banks, and diminish their ability to provide valuable customer service by focusing employees’ attention on compliance, rather than meeting customers’ needs. One example of such new, burdensome regulation might be the requirement that banks ascertain upfront whether small businesses seeking loans are women or minority owned, and then handle that information in ways that could potentially prove cumbersome in terms of internal administration. Another would be the requirement that banks itemize each loan according to 12 specific criteria, in addition to others that the Consumer Financial Protection Bureau (CFPB) may deem appropriate.
Community banks could also suffer from provisions making it tougher to move loans off their books, which those involved in the industry say could ultimately negatively impact their ability to make new loans to businesses and families in their communities. Backers of financial reform say that such restrictions are necessary, to ensure that lenders aren’t making credit available to people who will never repay it, without themselves retaining substantial risk for doing so. However, critics say this discounts a core reality of community banking: Community banks have a better track record of making quality loans than do the non-bank lenders whose actions experts say were responsible for the meltdown in 2008, and who critics charge were too disconnected from the people they purported to serve. Furthermore, some banks are concerned about lower lending limits that could be foisted upon them under the bill, and which they say could affect their ability to meet ongoing customer needs.
Still another difficulty presented by the Dodd bill is the prospect that community banks could find themselves regulated by multiple different entities, including (depending on their structure) the Federal Reserve, the Federal Deposit Insurance Corporation, and the new CFPB.
Experts who have reviewed the Dodd bill’s language say relatively simple changes could ensure a regulatory overhaul that will prevent the kind of situation that arose in 2008 from occurring again without hammering community banks. If these changes are not made, they warn that, were the bill to be passed and signed into law, we could end up with a more risk-prone system that is host to less competition and more consolidation of power and money in the hands of many of the actors whose behavior instigated the meltdown in the first place. However, a key question that remains is whether political leaders driving this legislation want a real solution, or what one critic called “a bright shiny object that looks like meaningful, effective financial reform to wave at the voters come November.”
As Democrats continue to up the volume on their deceptive campaign to pass a new government takeover and bailout bill for bit Wall Street Banks, apparently there is some nervousness about the pressure Democrats are directing at the two Republican Senators from Maine. The mystery group Committee for Truth in Politics is back up on the air in the Pine Tree State with an ad opposing the Big Bank Bailout.
The two Senators from ME recently received visits from local TEA Party activists to thank them for standing strong against the takeover bill. Lets hope that Sens Collins and Snowe keep listening to their constituents and not Democrat propaganda.
Looking for evidence that the Financial Reform legislation pending before the Senate is a power grab and not an effort at “reforming the system?” Look no further than the man Washington insiders believe would head the proposed “Consumer Financial Protection Agency” should the bill become law.
Eric Stein.
Remember the name. He is deputy assistant secretary for consumer protection at the Treasury Department. He was also a key player in the Center for Responsible Lending — a front group funded by billionaire John Paulson who worked with Goldman Sachs to package mortgages into securities.
In the house of cards that was the mortgage securities market — Stein was the Jack of spades. While Paulson was the bag man for the CRL operation, Stein was it’s hatchet man. Stein harassed and threatened banks into making bad loans. Paulson primed the pump and Stein fueled the fire.
Stein promoted policies that, in his words, encourages other lenders to make suststainable loans to borrowers with blemished credit.” In other words, they would buy loans from banks to make such loans Then the loan would be kicked up to Fannie Mae. Paulson got rich. Taxpayers got bilked.
Rather than being promoted to protect consumers, he needs to explain his role in creating and sustaining the crisis.
Conservative talk radio in Memphis is calling for the firing of the staff member of Sen. Bob Corker who demeaned and belittled Tea Party activists in the Volunteer State calling them “sad” and “creepy” when they visited the office protesting Corker’s support for establishing a permanent bailout fund for companies “too big to fail.”
Corker is leading the charge for a “bipartisan” deal on so-called financial reform legislation that will create bailouts as far as the eyes can see, create a new regulators for small businesses (that had nothing to do with creating the crisis) and empowering big labor with shareholder proxy provisions aimed at undermining private company policy decisions. The House passed version of the bill authorizes the Federal Reserve to spend up to $4 trillion for bailouts. The Senate version is a blank check.
Attitudes are set at the top of the organization.
Compare the response to Sen. Collins staff when Tea Party activists visited their offices this week to the smugness of the Corker organization. We fear that the attitude of the staff member is a symptom of a larger disease that is prevalent in the Corker office.
Corker’s staff may not like it, but, according to Gateway Pundit, it looks like they’re going to get another visit from the tea party today.
Today I am releasing the following web video highlighting President Obama’s financial bailout bill that will impose burdensome regulations and new fees on local banks in my district back in Ohio and other local communities around the country. In addition, Obama’s plan rewards top Democratic contributors and promises permanent bailouts to Wall Street companies deemed ‘too big to fail.’ The video and full remarks are outlined below:
The American people have made it clear that they’ve had enough of the bailouts and all the open-ended expansion of government in Washington.
But instead of listening, President Obama and the majority party in Congress continues to scheme up new costly policies that will make bailouts permanent, kill jobs and impose new burdens on taxpayers.
This week, they’ll continue with their push to pass a job-killing permanent bailout bill for Wall Street.
Their plan promises permanent bailouts for the giant ‘too big to fail’ companies on Wall Street, while piling new regulations and fees on small community banks in Ohio’s 8th Congressional District.
It also sets up a ‘consumer protection agency’ that doesn’t even cover all financial products, which is supposedly what it’s all about. Instead there are lots of special deals and new control for government bureaucrats, just like in their government takeover of health care.
President Obama likes to say we need to clean up Wall Street. But let’s be clear: He is pushing a bailout bill for Wall Street that is supported by and benefits one of his top campaign contributors – a financial firm that just happens to be under investigation by the SEC for defrauding investors.
House Republicans are standing with the American people and fighting to end the bailouts once and for all. Our alternative plan will protect taxpayers, consumers and investors, and get the government out of the business of picking winners and losers in the private sector.
Find out more, and check out our solutions to get control of government spending and help small businesses create jobs, at Johnboehner.house.gov.
In old movies (and a lot of new ones too), there is the usual formula of romantic tension between the leading man and the leading lady. They usually start out hating each other but ultimately find themselves drawn to each other. This usually culminates in a climactic argument, during which the woman expresses her total contempt and disdain for the man: “I hate you!” He then grabs her, pulls her close, and plants a big, passionate kiss on her. She, of course, succumbs, and the two then declare their undying love for each other.
President Obama and the Democrats are engaged in this coy Love-Hate faux drama with Goldman Sachs and the rest of Wall Street. Obama has railed continually against the “fat cats” on the Street, whom he blames loudly and repeatedly for the financial crisis. They do, of course, bear some of the responsibility. But wouldn’t it be nice and refreshing to hear him level
his ire at the ACTUAL main perpetrators of the crisis: Fannie Mae and Freddie Mac? Of course, he can’t do that, because that would mean admitting fault with the social engineering of the Jimmy “My Name is Earl” Carter and Bill “Bubba” Clinton-supported Community Re-Investment Act and other misguided and destructive left-wing economic policies.
No, he’s stuck to the safe script: the surefire populist message that all of the banks are bad, Goldman is the worst of the worst, and that they need to be spanked like a Terrible Twos Terror Child.
Just one problem: Obama accepted nearly $1 million from Goldman folks during the 2008 presidential campaign.
Other top Democrats have long been raking it in from Goldman and other big banks they now demonize as greedy, profit-driven Anti-Christs. Earlier this year, the president of Goldman hosted a fundraiser for Senate Majority Leader Harry Reid, which netted him $37,000. When reporters asked him about that yesterday, he read haltingly from a written statement and then ran away.
This is yet another case of the hypocrisy of the Left. They blister the banks and seek to punish them, while at the same time slurping like pigs at the banks’ trough.
It’s not often the two Republican Senators from Maine safeguard the country from excessive government with more vigilance than a Republican Senator from Tennessee. But on the issue of Financial Reform, Sen. Collins and Snowe have become champions for the taxpayers — holding the line against more bailouts and bureaucracy — while Sen. Bob Corker continues to push the country toward permanent bailouts and a Washington regulatory scheme “one like we have not seen before.”
Big Government readers are well aware of Corker’s repeated attempts to cut a deal with “Countrywide” Chris Dodd. Despite signing a letter pledging to oppose the legislation, Corker is now taking to the airwaves denying the legislation contains a permanent bank bailout provision.
Neat trick Senator. Swear to your constituents that you oppose further bailouts and then push a bailout bill by simply saying it contains no bailouts.
Corker has become to Financial Reform what Sen. Lindsey Graham is to climate change legislation — a sucker. And his words are being used by left-wing activists to deny there is a bailout in the legislation.
Corker took to the Senate floor and said ” this fund that’s been set up is anything but a bailout. It’s been set up to, in essence, provide upfront funding by the industry so that when these companies are seized, there’s money available to make payroll and to wind it down while the pieces are being sold off. Now, a lot of people have said this is a Republican idea. There’s no question that this is something Sheila Bair has proposed. The FDIC wants to see a ‘prefund.’ The Treasury would like to see a ‘postfund.’”
Isn’t that precious. Corker is praising the fact that the legislation empowers the federal government to “provide upfront funding” for its seizure of banks and breakup by the feds. Earth to Corker — conservatives support smaller government.
Sen. Susan Collins (R-ME) understands that the Dodd Financial Reform bill they are trying to ram through the Senate is a bailout. She has publically opposed the legislation. But that hasn’t stopped the Administration from pressuring her to change her mind.
The Wall Street Journal reports that Treasury Secretary Tim Geithner will be meeting with Sen. Collins to try to get her to see a different version of reality.
But, the American Enterprise Institute’s Peter Wallison says that not only is the bill a bailout but it would benefit Goldman Sachs” “That act—paying off the creditors when the government takes over a failing firm—is a bailout. It doesn’t matter that the management lose their jobs, or that the shareholders get nothing. When the creditors are aware that they will get a better deal with the failure of a large company than they will get with a small one that goes the ordinary route to bankruptcy, that is a bailout.”
To top it off, the fees for the Dodd bill’s resolution fund that would pay off a failing firm’s creditors would come not just from banks but from a broad array of Main Street businesses. Stable life, auto and home insurance companies would have to pay into this fund to subsidize the failure of the next high-roller, and the fees they pay would likely be passed on in the premiums their policy holders pay. And the bill’s definition of “nonbank financial company” is so broad that it could cover manufacturers only tangentially involved in extending credit, such as those that lease equipment to their customers. This would raise prices and cost Main Street jobs.
All in all, the Goldman indictment should serve as a wakeup call to those who want to ram a bill through Congress without looking at who both its victims and beneficiaries would ultimately be.
Senator Collins should know that the public isn’t fooled and she shouldn’t be either. Senator Collins’ phone number is 202-224-2523.
Liberal pundit Michael Kinsley once defined a political gaffe as an instance of a politician accidentally telling the truth. House Financial Services Committee Chairman Barney Frank, D-Mass., recently made a gaffe that fits Kinsley’s definition to a tee.
In a debate with Ralph Nader on MSNBC’s “The Ed Show,” in which Nader was accusing Frank of being too timid on the financial regulation bill then moving through the House, Frank responded, “We are trying in every front to increase the role of government in the regulatory area.” Conservative blogs took note of Frank’s use of the word “every front”, as did Rep. Paul Ryan (R-Wis.), and earned a brusque “tsk- tsk” from The New Republic’s Jonathan Chait.
This is an example of “the conservative misinformation feedback loop in action,” Chait exclaimed. Frank was only talking about banking, Chait claimed, and “not confessing to a plan to expand government in every area.”
Actually, in prefacing his comments, Frank moved the topic from Nader’s point about derivatives to the broader issue of how “the right wing took control of government and ruined it” and how it is supposedly benefitting from its “own incompetence.” But if one still doesn’t want to take this as Frank’s confession of wanting to increase government intervention “in every front,” one need look no further than the bill by Frank that passed the House in December and Chris Dodd’s Senate “financial reform” bill that Democrats are trying to ram through the Senate.
In the debate, Democrats never tire of accusing Republicans of siding with “Wall Street banks.” But last week Republicans made headway when Senate Minority Leader Mitch McConnell pointed out that the bill $50 billion resolution fund would institutionalize bailouts for big banks, whether these banks failed themselves or acted as creditors to too-big-to-fail institutions. Even an editorial in the Washington Post stated that “Mr. McConnell is partly right” and that “creditors might fund systemically important firms on artificially advantageous terms, thus enabling them to grow bigger and riskier.”
But the same editorial wrongly asserted, as many have, that “Wall Street would provide the $50 billion fund” entirely. Putting aside the fact that taxes on any firms are always passed on to some extent throughout the economy, the fees for this fund would come from the broad category of “financial institutions” defined by the Dodd bill.
I previously wrote in BigGovernment.com that this category will likely include home and auto insurers, such as Geico, Allstate and State Farm — relatively stable firms that had virtually nothing to do with risky bets that led to the financial crisis. But now, experts looking at the bill’s language see that the bill’s specific coverage of “nonbank financial companies” could mean taxation, regulation, and even possible nationalization for a wide variety of Main Street businesses, who would suddenly find themselves under the direct supervision of the Federal Reserve Board, the bill’s designated regulator for “systemic risk.”
“The legislation … gives the Federal Reserve power to regulate any large company in America.,” writes Gregory Zerzan, former Deputy Assistant Treasury Secretary in the Bush administration, in the Wall Street Journal. “The current proposals for “financial” reform are stalking horses allowing government intervention into virtually every facet of the U.S. economy.”
The 1,336-page Dodd bill — called the “Restoring American Financial Stability Act” — defines “nonbank financial company” as any business that is “substantially engaged in activities in the United States that are financial in nature.” Note that there is no requirement that these firms actually be affiliated with a depository bank or a broker-dealer.
As Dorothy Coleman, vice president for tax policy of the National Association of Manufacturers (NAM), has noted, the bill could have clarified matters by using the tighter phrase “predominantly engaged” in financial activities. But instead, the Dodd bill’s “covered companies are defined as those with ‘substantial’ financial activities and the Federal Reserve Board gets to decide who falls into the definition.”
Coleman wrote that U.S. “manufacturers that engage in routine financial activities as a small part of their main business, e.g., a global manufacturer that manages a foreign exchange trading operation, an equipment manufacturer that provides financing for customers, are concerned that they could be pulled into the systemic risk regulatory regime, drawing needed capital from their businesses and imposing new administrative burdens.”
And Zerzan noted that “financial activities,” as defined by the law the Dodd bill makes reference to, could “include things non financial businesses do everyday like extending credit to customers and holding downpayments on deposit, or even managing a company’s own investment portfolio.” According to Zerzan, the Fed could turn IBM, Wal-Mart and Boeing into “financial” businesses.
And once these businesses become “financial,” the Dodd and Frank bills give the Fed virtually unlimited power over them. This includes the specific power to seize, or nationalize, them if they are deemed to be too much of a “systemic risk.” An Obama administration white paper from last June called for the government to have “broad powers to take action with respect to the financial firm,” including “the authority to take control of the operations of the firm or to sell or transfer all or any part of the assets of the firm.” The Frank and Dodd bills largely follow this directive.
The bill’s broad definition of financial company was apparently one of the reasons that Sen Bob Corker (R-Tenn.), who has become the media’s favorite Republican on this issue for his efforts to seek compromise, has so far not come to agreement with Dodd and signed on to the letter of opposition from all 41 Republican senators. To his credit, Corker told the Washington Post’s liberal blogger Ezra Klein that “the biggest issue is narrowing what the Fed is able to do,” and that the Fed’s new authority should “clearly, solely to apply to financial institutions.”
But just after saying that to Klein, Corker immediately reverted back to “get along” mode, saying: “I think the rhetoric has been overheated, and I’ve cautioned against it. Little words mean a lot here.”
Words do mean a lot, but given the boiling that the bill has in store for Main Street businesses, the problem isn’t that opposition rhetoric is overheated. It’s that the lukewarm criticism is not nearly hot enough.
Last week, the Securities and Exchange Commission brought civil fraud charges against Wall Street investment bank Goldman Sachs. The charges arise from the bank marketing collateralized debt obligations (CDOs) to customers without disclosing that a major hedge fund investor, and Goldman client, John Paulson had made a series of bets against the securities. (The SEC did not announce any charges against Mr. Paulson.)
The announcement of the charges comes at a volatile time for the financial industry. With the Senate set to take up its version of a sweeping revamp of the financial services industry, the allegations against Goldman are certain to have a prominent place in the debate.
Appearing this afternoon on Chicago’s WLS radio station, Illinois Senator Dick Durbin seemed downright excited about the allegations:
The timing was perfect. We’re about to take up the financial regulatory reform bill. The banks are saying Oh, this is totally unnecessary. We have everything worked out. Now we find out the Securities and Exchange Commission has stepped up and charged Goldman Sachs, one of the biggest, with involvement in some trading that really turns out to be very suspicious.
Ah yes, the “timing was perfect.”
Odd how that happens in DC, from time to time. According to the New York Post, Barclay’s banking analyst Roger Freeman came out and stated what is on a lot of Wall Street minds this weekend:
Barclays banking analyst Roger Freeman comes right out and blasts the SEC effort as “a well-timed, and perhaps not coincidental, effort to sway some on-the-fence Republicans” to get tough on financial reform.
“Targeting GS, given the flurry of anti-Wall Street press that has centered around that firm, offers the publicity that the administration needs at this critical juncture,” Freeman says in a note to clients today.
Big Government has detailed many of the problems with the current financial “reform” proposal. (See here, here and here, for example.) As the bill’s details become known and understood, even moderate GOP Senators like Scott Brown and Susan Collins had recently announced their opposition.
Of course, that opposition was announced before the current allegations were announced.
Indeed, the “timing was perfect.”
Update: Erick Erickson at Redstate has more on the suspicious timing of the charges. Within minutes of the announcement of the charge, all parts of the Democrat Industrial Complex were able to move quickly to capitalize on the allegations. The New York Times and Organizing for America, respectively had full coverage of the charges and a sophisticated e-mail action alert based on them. Giving the benefit of the doubt that the independent agency hadn’t tipped off these folks about the charges, everyone involved should get little plaques for most productive workers of the year!
The Obama Administration is concerned their takeover of the financial industry is at risk and are offering Republicans a fig leaf to buckle.
First they deny there was a bailout in the legislation. Now they are proposing the removal of a $50 billion fund that oversees future bailouts.
Don’t be fooled — the $50 billion is just a downpayment to administer future bailouts. The funding for the permanent bailouts will come from the Federal Reserve under the Blank Check Bailout bill.
The House bill authorizes the Fed to spent $4 trillion to bailout and “wind down” companies. The Senate bill doesn’t have a cap.
The Administration’s play is a sleight of hand. Don’t be fooled. If they were serious about ending future bailouts, the legislation would have a prohibition against it. It doesn’t.
Democrats’ collective fixation on Frank Luntz’s memo on Financial Reform misses the point entirely but it is very telling.
The now famous Luntz memo makes strategic recommendations based on an aggregation of voters’ responses to being informed about various portions of the Dodd Blank Check Bailout bill in factual, common sense, simple language. The public spoke and Luntz recorded it. He didn’t make up the fact that there is a $4 trillion dollar bailout in the bill. Its right there in black and white.
But what has Democrats completely possessed is that what the public said is inconvenient to their Orwellian plan to dupe America into believing that up is down, black is white and that the Dodd bill will end “too big to fail”, contains no new bailouts and will possibly save endangered animals.
Their plan is a two step process: First, use oblique language about “protecting consumers” and “ending too big to fail” to convince the public that the Dodd bill is somehow “financial reform”. Then, bully Senate Republicans into voting for Dodd’s government takeover bill by portraying them as against said “financial reform.”
So Democrats are pulling out all the stops. They have launched attacks to discredit the Luntz memo and label legitimate criticism of the Dodd bill “poppycock”. And President Obama has engaged to reassure the public that the bill will stop bailouts.
But here in the real world, Dodd’s bill is in fact an attempt to takeover the other 5/6 of the economy left after health care and makes bailouts the official policy of the US Government.
Did small businesses cause the Financial Crisis? Of course not. Nevertheless, small businesses take a huge hit in this bill. A little noticed provision tucked into the bill is a death blow to the American Dream that will severely limit the ability of the average American to finance a start up small business.
Dodd’s bill adjusts the net worth requirements for a person to be considered an “accredited or qualified investor” by the Security and Exchange Commission. The change would dramatically reduce the number of informal investors financing small business and start up companies across the nation. Even the Huffington Post — a cheerleader for the Dodd bill — has recognized the dangers of this provision: ”Meanwhile, in his zeal to regulate the monster banks of Wall Street, Senator Christopher Dodd, Chairman of the Senate Banking Committee is about to kill the most vital and exciting part of the American economic miracle in all of these areas — start-ups.”
Whether it is the next eBay or the next Joe’s Hot Dog stand, the bill will dry up the ability of people to invest their own capital in a small business. So, even though the words coming out of Democrats mouths say “reform” it sure sounds, looks and smells a lot more like “takeover”.
On bailouts and “too big to fail”, Democrats have repeatedly pointed to the $50 billion dollar fund created by new taxes and fees on banks and disingenuously said that “taxpayers shouldn’t have to pay.” Aside from the fact that taxpayers will pay regardless when banks pass along the costs, there is a bigger omission here that puts taxpayers directly on the hook. While the $50 billion fund is certainly in the bill, the bill also gives the Fed unlimited authority to use taxpayer money as well.
So, rather than eliminating bailouts Dodd’s bill actually gives big bank CEO’s TWO bailout funds to catch them when their risky bets don’t pay off. Yet, Democrats continue their propaganda campaign with a straight face and repeat over and over that the Dodd bill will end “too big to fail” and contains no bailouts.
The public should not be fooled and should make sure that their senators aren’t either.
As long as the Democrats continue to control Congress, we’ll have to endure an endless procession of initiatives for the federal government to take over industry after industry. Health insurance and college loans went under federal hegemony with passage of a single bill, known as “ObamaCare.”
Now, a new bill, referred to by the name of its chief sponsor, the ethically challenged Sen. Chris Dodd of Connecticut, aims to consolidate a federal takeover of the nation’s entire network of financial institutions.
Does the bill, as [Republican Senate leader Mitch] McConnell said, “institutionalize too big to fail?” Of course. There can’t be any reasonable doubt about this. The bill authorizes the Fed to regulate all non-bank financial institutions that are “systemically important” or might cause instability in the U.S. financial system if they failed. . . .
The market will see immediately that the government has created Fannie Maes and Freddie Macs in every sector of the financial system where these large companies are designated for Fed regulation, including insurance companies, hedge funds, finance companies, bank holding companies, securities firms, and any other kind of financial institution the government wants to regulate. Since these firms will be too big to fail, they will be seen in the market—as Fannie and Freddie were seen—as ultimately backed by the government and thus safer firms to lend to than small firms that are not government backed. This will permanently distort the financial market, favoring large companies over small ones, and eventually force a consolidation of each market where these firms exist into a few large competitors operating under the benign supervision of the government.
In other words, this is another huge step toward fascistic corporatism, completing a de facto government takeover of today’s nominally “private” financial firms. These corporations would be reduced to the status of politically managed public utilities.
Professor Brad Smith of Capital University Law School stressed that latter point to me:
It’s important to note that this is not just about more bailouts, but it will be bailouts for the politically connected and favored. If the President and Congress think you are a “savvy businessman” (which means you support his party) you’ll be in the pink. But if you are a “corrupt Wall Street Titan” (meaning you don’t support his party) well . . . .
Absolutely true. This is not only a federal takeover, but more specifically a political takeover of major financial corporations. Smith adds: “Republicans can rally public opposition if they get this message out there consistently.”
The repercussions of this legislation are as significant as ObamaCare. But even some Democrats are wavering on it. It can still be defeated.
I urge you to contact your two U.S. senators today. (And while you’re at it, make sure to send a copy of your message to Sen. Susan Collins of Maine.) Tell them to oppose the pending financial reform legislation, the so-called “Dodd bill.” Tell them it represents “crony capitalism” at its worst, putting taxpayers on the hook for guaranteed bailouts of any and all financial institutions deemed “too big to fail.”
Tell them that this will give unfair market advantages to big, politically connected corporations over smaller, politically unfavored competitors. And that, in turn, will completely distort the financial-services marketplace, creating the false impression that large, government-backed institutions—like AIG, Fannie Mae, and Freddie Mac—are inherently safer for investors and lenders than their smaller rivals. That can only encourage the consolidation of the financial-services sectors into a few gigantic monopolistic institutions, adding to the “moral hazard” problem of rewarding irresponsible businesses at the expense of their responsible competitors.
And you might want to add that we, the voters, will have the last word if power-craving members of Congress continue to imagine that they are “too big to fail” in November.
Despite efforts by some weak sisters like Sen. “Bailout” Bob Corker (R-TN) to cut a deal with “Countrywide” Chris Dodd (D-CT) on legislation to create a Blank Check Bailout Bill and lots of loud speculation from Senate Democrats about peeling off a Republican, Senate Republicans are currently holding firm against intimidation tactics to ram the bill through the Senate a la Health Care Reform.
Sources on Capitol Hill report that Sen. Shelby recently briefed Senate Republicans about the bill and got unanimous support for his efforts to block the Democrats latest government takeover scheme. Unanimous support means that even the Senators from Maine — Susan Collins and Olympia Snowe are holding the line against future bailouts despite ongoing White House efforts to jam the bill. According to our sources, Collins even went so far as to make an explicit commitment to Shelby to oppose the bill saying she has many problems with it.
And with good reason too. As readers recall, the so-called “Financial Reform” legislation contains a number of key provisions – none of them good–that creates more bureaucracies, more fees and taxes, more Washington red tape and makes bailouts the permanent policy of the US Government. But while offering permanent bailouts and a government takeover of the rest of our economy the legislation of course does nothing to address the root causes of the crisis including Fannie Mae, Freddie Mac and the consumer lending laws that pushed mortgages to people who could never afford to pay them back.
The House bill version of the bill authored by Rep. Barney Frank (D-MA) authorized the Federal Reserve to spend up to $4,000,000,000,0000 (trillion) to breakup and bailout failed companies. The Senate bill is worse – it contains no limit. The Dodd bill is nothing more than a blank check to enshrine bailouts as the permanent policy of the US government.
Adding insult to injury, both bills create a new red-tape creating bureaucracy that – in the words of Sen. Dodd is one like we have “never seen before.” The agency will be authorized to regulate any and all financial transactions – from car loans to lay away plans.
And despite the populist rhetoric, its big banks and former heads of the Federal Reserve that support the legislation.
Contact your Senators immediately. Tell them to oppose the BLANK CHECK BAILOUT BILL.
A few weeks ago, Democratic strategist Robert Creamer was repeating the widely-circulated slanders about the Tea Party: “Is there any wonder that they spit at members of Congress as they went to vote, or that they hurl racial insults that are dredged up from the worst parts of America’s past,” he wrote in his column at the Huffington Post.
Today, Creamer is full of praise for the Tea Party movement–with nary an accusation of racism or violence in sight. “Tea Party activists don’t much trust big institutions of any sort–big government or big banks. They think of themselves as victims of the bureaucrats in Washington as well as the big banks in New York,” he writes.
What seems to have changed Creamer’s mind is the realization that more and more Americans sympathize with the Tea Party’s simple goals–which, in my understanding at least, are to protect and to expand freedom and opportunity for all Americans by restoring our constitutional values and limiting the size and reach of government.
Creamer seems to believe that the Tea Party can be turned against “traditional Republican defenders of Wall Street.” Some of Wall Street’s most devoted patrons are Democrats, but never mind. Creamer seems to envision a sort of proletarian unity, in which ordinary people can be whipped up in anger against their perceived oppressors.
I think Creamer has the Tea Party wrong, in that its members are not hostile to the free market ideals that built America.
Many resent the role that banks played in the financial crisis, but my sense is that they resent the role of government even more–particularly the bailouts and the role played by government-linked Fannie Mae and Freddie Mac.
I also think that the direction in which Creamer hopes to push the Tea Party–attacking banks and shadowy capitalist forces–is unwise and unwelcome. Creamer is fond of these themes, despite the fact that they have historically led to destructive forms of nationalism, socialism, and antisemitism particularly during tough economic times.
It is almost as if Creamer wishes the Tea Party to become the extreme movement he once claimed it to be. His broader aim may be to marginalize it, and capitalize on its many faults and fractures. His more immediate goal is to take votes away from GOP candidates, whether through third-party efforts or simply depressing Republican turnout.
Regardless, Creamer’s new approach to the Tea Party reveals that its critics are fully prepared to acknowledge its legitimacy, as long as they can turn the movement against Republicans. The allegations of racism, homophopia, etc. are largely a sham, aimed to blunt the Tea Party’s message when it conflicts with partisan Democratic priorities.
Above all, the new seriousness with which the left and the media are treating the Tea Party is a sign of its effectiveness. Not everyone with agree with everything the Tea Party stands for, least of all the Tea Party itself. But the basic message–more freedom, less corruption–is well within the mainstream, and one that most Americans share.
Last week, I had the honor of speaking to a robust group of conservatives in New Hampshire — and I saw a level of energy within our movement that I haven’t seen in a long time. People are fired up. And not just in the Granite State. Everywhere I travel these days, Americans are standing up and declaring themselves ready to fight for the principles and values that made this the greatest country in history – principles and values that are under attack by the Democrats in Congress and the current administration.
Today, the federal government owns or controls the nation’s largest insurance company, two of the three American auto manufacturing companies, the two entities that hold a majority of our mortgages, the entire student loan industry, wide swaths of the banking industry and now a major portion of the American health care delivery system.
Think about it. With his individual mandate, President Barack Obama and the federal government are now forcing Americans to buy a good or service simply for no other reason than they are alive. Their reform will lead to higher taxes and higher premiums – and not reduce the exploding health care costs that are the underlying problem of America’s health care system.
Let me put it bluntly: America is headed in the wrong direction.
We need to help good people running for office who understand that the federal government is overreaching and are willing to stand up and say, “Enough!” I’ve set up my Freedom First PACto help elect those sorts of candidates to Congress this year.
The folks I’m talking with around the country tell me they’re ready to fight back against this massive expansion of the federal government. If you agree with them, I invite you to join me during my Facebook Town Hall on Wednesday night at 7:15 PM Eastern. I’m going to talk for a few minutes about some of the great candidates I’m supporting in 2010 and then I’m going to ask to hear directly from you. You’re going to get a chance to nominate conservative candidates for federal office to be enrolled in the Freedom First PAC’s fundraising program. My hope is that this program will give the grassroots unprecedented influence over the 2010 election.
It’s not often that we can give credit to Barney Frank but when it comes to the issue of Financial Reform at least we can say is he was honest enough to put a price tag on the proposed permanent bailout fund. Can’t say the same for Sen. Chris Dodd.
The Frank bill’s price tag for future bailouts was clear — $4 trillion.
Sen. Dodd’s bill proposes the same bailout authority but makes matters even worse — he leaves the check blank. Taxpayers will be on the hook for any amount.
Dodd’s bill gives the Fed “emergency lending authority” to “any “ entity or market utility, program or facility that the Financial Stability Oversight Council determines is or is likely to become “systemically important.”
But don’t worry. They have to report back to Congress why they used this authority within seven days afterthey use it. But– they only have to disclose whothey helped “within one year” and only if they deem that it won’t hurt the “effectiveness of the program”
Still thinking maybe this isn’t a bailout? Well, on page 1306, one of the requirements is that the Fed has to report to Congress “ the expected or final cost to the taxpayers of such assistance.”
So, to summarize–the Fed has authority to lend money to any entity it deems fit, in any amount it sees fit but has to report after the fact how much it cost the taxpayers but they only have to tell you who they gave it to if they want to.
If that doesn’t sound like a bailout to you, then I’m selling some oceanfront property in Arizona that I’d like to talk to you about.
Republicans on the Senate Banking Committee have made it clear they are trolling for a deal on this issue. But for all the hand wringing, technical talk and political doublespeak on this issue it boils down to two simple yet distinct paths for dealing with failing companies–bailout or bankruptcy. Either the taxpayers are on the hook to spend money on these companies or they are not.
Dodd’s bill clearly puts taxpayers on the hook. So any sort of compromise that involves “emergency lending authority” is merely negotiating the terms, size or scope of the bailout and any vote for this bill or its negotiated cousin is a vote in favor of bailouts.
Hopefully the Republicans on the Senate Banking Committee can see that.
Surprise, surprise. Sen. Chris Dodd’s financial-regulation proposal raises the possibility of substantial progress on the road to ending “too big to fail” (TBTF) and bailout nation for banks and other financial institutions.
How the Dodd bill will play out in the final details remains to be seen. But when you read the Dodd fact sheet, there are a few key items to like.
First, under the Dodd scheme, large complex companies will have to submit plans for rapid and orderly shutdowns should they go under. These are called “funeral plans.” Then, in terms of these orderly shutdowns, the bill would create an “orderly liquidation mechanism for the FDIC to unwind failing systemically significant financial companies. Shareholders and unsecured creditors will bear losses and management will be removed.” Good.
Then comes the “liquidation procedure.” This spells out that the Treasury, FDIC, and Federal Reserve must all agree to put companies into the orderly liquidation process. “A panel of three bankruptcy judges must convene and agree — within 24 hours — that a company is insolvent,” the bill goes on to say. It also states that the largest financial firms will be assessed $50 billion for an upfront fund that will be used if needed for any liquidation. This is a kind of debtor-in-possession safety net for the bankruptcy-liquidation process. Also good.
Finally, under the heading of bankruptcy, the bill stipulates that most large financial companies are expected to be resolved through the normal bankruptcy process. This is the key. However, it is not an airtight case for bankruptcy. It is possible that a government-resolution process could keep big banks alive or in conservatorship, such as with Fannie and Freddie. That would be wrong. Very wrong. In fact, one of the flaws in the Dodd bill is that there is no mention of Fannie and Freddie.
But the strict language on bankruptcy judges and shutdowns, and the line stating that most large failed financial firms are expected to be resolved through the normal bankruptcy process, is very hopeful.
The biggest flaw in the Dodd bill is that it gives the Consumer Financial Protection Agency (CFPA) far too much free reign. The agency will be housed in the Federal Reserve. But it will be independent inside the Fed, with a director appointed by the president and financed by the Fed’s own profits.
The Fed itself apparently would have no say on CFPA rule-making, which is sort of like giving Elizabeth Warren her own wing at the central bank in order to make mischief. At a minimum, she’ll need grown-up supervision. Many smaller community bankers and non-bank Main Street lenders — such as stores with layaway plans, check-cashing companies, pay-day lenders, and even car dealers — could be put out of business by Elizabeth Warren. (Hat tip to Capitol Confidential of Andrew Breitbart’s biggovernment.com.)
Another issue is the so-called “Volcker rule,” set forth by the White House, which would limit proprietary trading for Wall Street banks, a big source of revenue and profits. Under the rule, it looks like the Federal Reserve or other regulators would supervise any trading limits, but not necessarily eliminate proprietary trading. I think TBTF is terminated under the threat of a true bankruptcy-court liquidation. That’s enough of a disincentive for excess risk-taking to obviate the need for a Volcker rule.
Ditto for the trading of derivatives and other counter-party activities such as credit-default swaps. These are useful hedging devices, although they should be fully collateralized, with clearly valued assets and cash behind them.
Back to the Dodd plan, it also stipulates that the U.S. president appoints the New York Fed president. That’s another flaw. It politicizes the Fed big time. Right now, reserve-bank presidents are chosen and appointed by their boards of directors.
And then there’s a “proxy access” provision that would force public companies to list rival slates for election to their boards of directors. This goes way beyond “say on pay.” And it would permit a bunch of liberal-left, union-type interest groups to spread their anti-business opinions.
However, with the Dodd plan, the possibility remains that a true bankruptcy process will replace government bailouts.
This is vital, since TBTF and government bailouts are among the root causes of the banking crisis, where large financial companies have a moral hazard to take too much risk at taxpayer expense.
The devil will be in the details. And of course, Dodd’s Senate bill will have to reconcile with Barney Frank’s bill in the House. But Chris Dodd conceivably may have opened the door to ending TBTF and bailout nation.
With the focus this week on health care’s “home stretch” and concerns about government limiting the ability of ordinary Americans to make choices about medical treatment, another threat to freedom is accelerating that could harm Americans’ abilities to start a business, invest for retirement, and get affordable home and auto insurance policies. On Monday, after abruptly shutting down earnest negotiations between Senate Republicans, Senate Banking Committee Chairman Chris Dodd wannounced a partisan so-called financial regulatory reform bill that he will try to ram through his committee within a week.
And this 1336-page bill will do nothing to put restrictions on two entities that were proximate causes of the housing bubble, the government-sponsored Fannie Mae and Freddie Mac, and instead hit Main Street businesses and entrepreneurial firms that had nothing to do with the crisis. The bill’s specific provisions would penalize the corporate structure of public companies from Google to Warren Buffett’s Berkshire Hathaway, tax prudent banks stable home and auto insurers and their policy holders to pay for the bailout of the next Lehman or AIG, depress revenues from incorporation fees in Sen. Harry Reid’s Nevada and Vice President Biden’s Delaware by federalizing corporate governance laws, and put thousands of retailers who issue gift cards or even offer layaway plans under a new Federal Reserve bureaucracy to regulate credit.
Here are the highlights of some of most destructive provisions for the freedom of entrepreneurs, investors and consumers.
1.The shareholder rights jujitsu with “proxy access” and other corporate governance mandates.
According to Politico, so-called “proxy access” language was one of the main issues “not resolved.” There is good reason for it not being resolved. This is because proxy access has nothing to do with complex financial products and everything to do with empowering shareholder groups on the Left, such as union pension funds and foundations backed by Leftie donors like George Soros, to pressure public companies to bow to their various agendas.
For more than 150 years, state law has governed the director nomination and election process for corporations and their shareholders. In states such as Delaware and Nevada, where many companies are incorporated, any shareholder can nominate a candidate for the board, but that candidate has to pay for the campaign out of his or her own pocket. Under Dodd’s bill, the federal government would force the companies and other shareholders to subsidize the campaigns of dissident shareholders and include their candidates in a company’s own proxy materials.
But as I have written in BigGovernment.com, subsidizing certain shareholders to let them run director candidates on the cheap opens the floodgates to special interest agendas that hurt the bottom line for ordinary shareholders. “Groups from unions to animal rights groups could run their own candidate for corporate directors and promote their special interest agendas at the company’s (and ultimately other shareholders) expense,” I wrote.
And leaders of 17 groups representing a broad spectrum of the center-right coalition — from my Competitive Enterprise Institute and Americans for Tax Reform to the Christian Coalition of America – recently sent a letter to members of the Senate Banking Committee pointing out that with proxy access: “Everything on the anti-market political wish list from cap-and-trade carbon restrictions, to animal rights activism, to interfering with defense contractors to advance foreign policy objectives would be possible. These initiatives, whatever their merits, belong in the political arena, not in corporate boardrooms where the focus should be on maximizing shareholder value.”
The bill also takes the unwise step of coercing companies into cookie-cutter corporate governance procedures such as separating the chairman and CEO. Some corporate governance activists have flagged this as a bad practice, but there is no empirical evidence that it harms shareholder returns. In fact, shareholders of Google and Berkshire Hathaway seem quite pleased with their CEOs – Eric Schimidt and Warren Buffett, respectively (both of whom supported Obama) – also serving as chairmen, and would be quite angry if the government were to penalize this practice that had been so effective for these companies’ growth and profitability.
In the meantime, as I have noted in the New York Daily News, Citigroup’s having a separate chairman and CEO throughout most of the last decade did nothing to prevent that firm’s financial implosion that resulted in taxpayer bailouts. Different governance structures may work better for different firms, as an entrepreneurial startup may opt for a close-knit board and a more established company may want to separate these positions. Regardless, shareholders are perfectly capable of deciding on things like whether the chairman and CEO should be separate, and that these matters shouldn’t be dictated to them by the government
Finally, the one-size fits all corporate governance procedures would greatly reduce the competitiveness of Delaware and Nevada in attracting firms from all over the world incorporating their because of the variety of corporate structures the states allow that work both for entrepreneurs and investors.
Dodd’s bill does NOT end “Too Big To Fail”; establishes $50 billion permanent bailout fund and taxes the prudent.
“Never again should the American taxpayer be asked to write a check because of an implicit guarantee that the federal government will bail out a company.” Dodd said at a news conference unveiling the bill on Monday. But Dodd’s bill not only doesn’t prevent taxpayer bailouts of failing financial firms, it ensures that they will continue. What the bill’s supporters call a “prefunded resolution authority” can be more simply defined a permanent bailout fund with a specific tax to subsidize the failure of any reckless firm.
Dodd’s bill summary puts great weight on the bailout fund’s “costs to financial firms, not taxpayers.” As the summary states, the bill “charges the largest financial firms $50 billion for an upfront fund, built up over time, that will be used if needed for any liquidation.” Similar to the Obama administration’s justifications for the bank tax or “financial crisis responsibility fee,” Dodd’s summary explains that “industry, not the taxpayer, will take a hit for liquidating large, interconnected financial companies.
How reassuring, not! Both of the explanations for the Obama bank tax and the Dodd “upfront fund” amount to a distinction without a difference. Unless taxpayers never open a bank account, borrow money, nor engage in any economic transaction whatsoever, the cost of the tax on financial firms will fall on them. And the failure is still not borne by the imprudent actor, but by the industry as a whole and its customers and shareholders. And an “upfront fund” will encourage more risky behavior, or what economists call “moral hazard,” by forcing prudent firms to set aside billions of dollars to essentially prefund the high-rollers risky bets.<
This is particularly true given the fact that this fee will most likely include not just large banks, but home and auto insurers such as Geico (a subsidiary of Buffet’s Berkshire Hathaway holding company), Allstate, and State Farm. These relatively stable firms had virtually nothing to do with risky bets that led to the financial crisis. The one exception among insurers was American International Group, and the major issue there was their exotic financial products, such as mortgage derivatives, not their traditional lines of insurance.
So you, the reader, may be getting an insurance policy hike, higher borrowing costs, and less interest on your bank account to pay for an upfront bailout for the next AIG, Lehman Brothers, or Countrywide (where you may remember, even if the media have forgotten, Dodd got a sweet mortgage deal). And you may also be getting reduced dividends or a lower shareholder return due to the “proxy access” mandates that empower progressive shareholders in the companies in which you invest to build your retirement portfolio.
In part II, we will talk about how the Federal Reserve will provide unlimited funding to a powerful new bureaucracy that will limit your ability to get credit and financing. Aren’t you glad the politicians are finally standing up for you? Or, should that be, standing upon you?!
Grassroots conservatives were rightly up in arms over Senator Corker’s game of footsie with far left Democrat Chris Dodd. The two worked together on President Obama’s effort to impose a massive new regulatory scheme on the American economy. Dodd, of course, is one of the architects of the current financial crisis. His decades long support of ACORN, Fannie Mae, Freddie Mac and the Community Reinvestment Act should have disqualified him from these negotiations in the first place.
The word from the halls of the Capital last week was that Corker was still trying to cut a deal with democrats… a bad deal.
But, it looks like Corker bailed after the constantpressure from conservatives this past week…
Senator Bob Corker (R-TN) just backed out of a deal with Dodd and democrats to establish a new federal bureaucracy to regulate the financial industry. Congress Daily reported:
Senate Banking Chairman Christopher Dodd said today he will unveil legislation to revamp the nation’s financial regulatory system without the support of Sen. Bob Corker, R-Tenn., with whom he had been working to strike a bipartisan deal.
“Over the last few months, Banking Committee members have worked together to try and produce a consensus package. Together we have made significant progress and resolved a many of the items, but a few outstanding issues remain,” Dodd said in a statement.
Dodd said he intends to unveil the bill Monday and hold a markup during the week of March 22 to move the bill out of committee.
“I have been fortunate to have a strong partner in Senator Corker, and my new proposal will reflect his input and the good work done by many of our colleagues as well,” Dodd added. “Our talks will continue, and it is still our hope to come to agreement on a strong bill all of the Senate can be proud to support very soon.”
Corker is scheduled to hold a news conference at 11 a.m. to give his version of the breakdown of the talks.
We look forward to his press conference.
Senator Corker better have a good excuse for turning his back on conservatives.
While most of the public is consumed by the health care-death-march spectacle, Senators Bob Corker and Chris Dodd are making serious progress on the Senate’s “financial services reform” legislation. The legislation was dead just a couple weeks ago, but Sen. Corker thought he could snag a seat at the grown-up table and stepped forward to ‘cut a deal.’
As is the new DC operating procedure for major legislation, there are almost no firm details on the current language. We know there will be a large new federal bureaucracy, somewhere within government, to provide “consumer protection” for financial products. We know there will be a $50 billion tax on banking customers to provide a permanent bailout fund, or as Sen. Corker would describe it, a “wind-down” fund. Unfortunately, we also know that the bill will do nothing to reform Fannie Mae or Freddie Mac, who continue to drain billions from the U.S. Treasury.
We’re told the Corker-Dodd Bailout Bill is a necessary response to the financial melt-down triggered by the collapse of the housing bubble. But, if it doesn’t take even small steps to reform Fannie and Freddie, then, simply, it isn’t a serious proposal. Its like rebuilding the porch on a house, while ignoring it’s cracked foundation.
Washington politicians would rather ignore this, but the housing bubble was the result of very explicit government policy. Throughout the 90’s and early 2000’s, officials from both parties became addicted to forever pushing homeownership rates higher than the laws of economics would otherwise allow.
If you want to identify the roots of the homeownership-cult among elected officials, fire-up the way-back machine and check out a little report issued by the Federal Reserve Bank of Boston in the early 90’s. Under the leadership of Richard Syron, then-President of the Boston Fed (more on him later), the report was the result of discussion among the bank’s staff and the usual collection of academics and professional activists. It was to make recommendations to the nation’s bankers on addressing alleged discrimination in mortgage lending.
Most of the report is innocuous pablum; a kind of cross between a Hallmark Card and corporate-ese. But, a few of the report’s recommendations are, in hindsight, more ominous. And while they were just ‘recommendations’, they were being made by one of the Fed banks, which carries a certain, shall we say, weight with bankers. From the intro:
The Federal Reserve Bank of Boston wants to be helpful to lenders as they work to close the mortgage gap. For this publication, we have gathered recommendations on “best practice” from lending institutions and consumer groups. With their help, we have developed a comprehensive program for lenders who seek to ensure that all loan applicants are treated fairly and to expand their markets to reach a more diverse customer base.
As far as it goes, fine. But, consider this:
Obligation Ratios: Special consideration could be given to applicants with relatively high obligation ratios who have demonstrated an ability to cover high housing expenses in the past. Many lower–income households are accustomed to allocating a large percentage of their income toward rent. While it is important to ensure that the borrower is not assuming an unreasonable level of debt, it should be noted that the secondary market is willing to consider ratios above the standard 28/36.
Got that. Banks should use their normal risk-based underwriting standards, because low-income people can carry more debt than families with higher income. Oh, and wink-wink, the secondary market will consider higher risk ratios. In other words, go ahead and underwrite the mortgage and you can probably sell it off. More:
Credit History: Policies regarding applicants with no credit history or problem credit history should be reviewed. Lack of credit history should not be seen as a negative factor. Certain cultures encourage people to “pay as you go” and avoid debt. Willingness to pay debt promptly can be determined through review of utility, rent, telephone, insurance, and medical bill payments. In reviewing past credit problems, lenders should be willing to consider extenuating circumstances. For lower–income applicants in particular, unforeseen expenses can have a disproportionate effect on an otherwise positive credit record. In these instances, paying off past bad debts or establishing a regular repayment schedule with creditors may demonstrate a willingness and ability to resolve debts.
Nothing can go wrong there. But, this is one of the more interesting items noted in the report:
Institutions that sell loans to the secondary market should be fully aware of the efforts of Fannie Mae and Freddie Mac to modify their guidelines to address the needs of borrowers who are lower–income, live in urban areas, or do not have extensive credit histories.
Boy, would Fannie and Freddie ever modify their guidelines. While the Boston Fed Report was being written, Fannie and Freddie were implementing their first congressional mandate to increase their holdings of mortgages to low-income buyers. From the Village Voice:
[Andrew]Cuomo’s predecessor, Henry Cisneros, did that for the first time in December 1995, taking a cautious approach and moving the GSEs toward a requirement that 42 percent of their mortgages serve low- and moderate-income families. Cuomo raised that number to 50 percent and dramatically hiked GSE mandates to buy mortgages in underserved neighborhoods and for the “very-low-income.”
At some point, the supply of low-income buyers who meet conventional loan standards is going to run out. It would be impossible for Fannie and Freddie to meet their federal mandate if they only bought conventional mortgages. So, by the end of the decade, Fannie, at the urging of elected officials and activist groups, purchased its first sub-prime mortgage. From the New York Times, September 29, 1999:
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
By the time the bubble burst, Fannie and Freddie were imploding under the weight of hundreds of billions in sub-prime and other risky mortgages.
A few more excerpts from the Boston Fed Report:
Even the most determined lending institution will have difficulty cultivating business from minority customers if its underwriting standards contain arbitrary or unreasonable measures of creditworthiness.
And,
Unintentional discrimination may be observed when a lender’s under- writing policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower–income minority applicants.
And,
management should be directed to review existing underwriting standards and practices to ensure that they are valid predictors of risk. Special care should be taken to ensure that standards are appropriate to the economic culture of urban, lower–income, and nontraditional consumers.
And, finally, a section that, seen in hindsight, gives me a headache:
The Board may also wish to encourage management to work with the public sector to develop products that assist lower–income borrowers by using public money to reduce interest rates, provide down payment assistance, or otherwise reduce the cost of the mortgage. The Board should also encourage management to work with special secondary mortgage market programs designed for lower–income homebuyers.
To be sure, there were a number of causes that inflated the housing bubble. The Fed’s policy of, essentially, free money in the early part of the decade sloshed money across the financial system and allowed credit to be widely available to anyone with a pulse. Ever more exotic financial products that few understood ingrained themselves into bank balance sheets as little ticking time-bombs.
But, the scope of the crisis would have been far less severe, if it hadn’t been accompanied by explicit government pressure on banks to loosen their lending criteria. Leftist activist groups like ACORN and the Center for Responsible Lending exerted complementary pressure through the media. With nearly-free money, entities like Fannie and Freddie eager buy up even the riskiest loans and near-universal predictions of forever increasing house prices, it is little wonder banks bowed to the outside pressure and loosened their standards. The rest is history.
Oh, about that Richard Syron, who headed up the first Fed report urging banks to loosen their lending standards. He became CEO of Freddie Mac at the end of 2003. He certainly put our money where his mouth was. In the final years of the bubble, 2005-2007, 40% of the loans Freddie took onto its books were junk loans.
Capitol Confidential and Jim Hoft have done an excellent job laying out concerns with the potential “compromise” bill that comes out of Sen. Bob Corker’s negotiations with Chris Dodd. But when it comes to the destructive provisions that could come out of a Dodd-Corker deal, they may have just scratched the surface.
In addition to the troubling new powers for a new nanny-state consumer agency and possibly the Federal Reserve added to the prospect of billions more in bailouts for reckless financial firm, the bill may also contain the sneaky “proxy access” power grab for unions, radical environmentalists, and other groups on the Left. This rule, inspired by Saul Alinsky’s Rules for Radicals, is contained in Dodd’s “discussion draft” bill from late last year.
As I detailed in BigGovernment last week, “proxy access would federalize and override decades of state law governing the structure of corporations and force publicly-traded companies to put shareholders’ nominees for a board of directors on a company’s proxy ballot along with the firm’s own nominees for those positions.” Many shareholder groups that are pushing this are union pension funds, the radical Tides Foundation, and other progressive groups — from animal rights to anti-Israel — who place their own political agenda items at the expense of ordinary shareholders.
Even if these groups’ nominees do not get elected as directors, they could use the threat of a campaign – which the company and other shareholders would be forced to subsidize – “as a lever to force U.S. companies to bow to the Left’s wish list on every policy from “card check” that would end secret ballot for union elections to cap-and-trade rationing of electricity to a silencing of conservative voices by small group of ideological shareholders who would have veto power over the content of a media company.” Indeed, proxy access could also serve as a type of Fairness Doctrine-rule in which progressive shareholders of media companies attempt to block conservative content, as now-disgraced New York Comptroller Alan Hevesi did when Sinclair Broadcasting was going to air the “Stolen Honor” documentary critical of John Kerry.
As I documented in the article, proxy access has its roots in the “proxy tactic” that community organizer Alinksy outlined in his Rules for Radicals. In that handbook, Alinsky called for progressive groups to utilize shareholder proxies as “the razor to cut through the golden curtain that protected the so-called private sector from facing its public responsibilities.” Alinsky admitted that this tactic “will result in diminished dividends” for middle-class investors, but said that it was necessary to fool the middle class to “build power for change.”
But on the debate on health care and other issues pushed by progressives, the middle-class is showing that it isn’t fooled as easily as Alinsky and his followers though they could be. It remains to be seen, though, whether the proxy tactic will fool Corker, or whether he will be educated on this and other forms of “corporate jujitsu”(Alinksy’s own words) by the legions of savvy middle-class investors and entrepreneurs.
On that note, I am happy to report that leaders of 17 groups representing a broad spectrum of the Center-Right coalition — from my organization Competitive Enterprise Institute and Americans for Tax Reform to the Christian Coalition of America — have sent a letter to Dodd, Banking Committee Ranking Member Richard Shelby (R-Ala.) and Corker expressing objections to proxy access. Such a rule, the letter states, “would benefit special interests with political agendas at the expense of ordinary shareholders” and “would allow … activists to achieve through the board nomination process what they have been unable to accomplish through the political process.” The letter is printed below and also available here.
And as previous BigGovernment articles have noted, you can share your thoughts with the office of Sen Bob Corker at (202) 224-3324.
It appears that the Bailout Bob Corker continues to ignore the pleas of his conservative allies and constituents and is close to reaching a deal on establishing a new consumer regulatory bureaucracy that in the words of Sen. Dodd, will be like one we have not seen before. Corker has told CNBC that the last stick point is not the principle of new regulation — he has capitulated on that point — but “administrative issues.”
The legislation includes Corker’s pet project, a “strong resolution mechanism for unwinding troubled companies.” News to Corker: For over 200 years, America had such a mechanism — it was called bankruptcy. But “unwinding” troubled companies is a code word for BAILOUT. The Federal Government, via the Federal Reserve, would be empowered to break-up, subsidized and bailout companies. As House conservatives warned during the House debate, enactment of the bill would establish bailouts as the official policy of the United States for decades to come. That’s why the House bill authorizes $4 trillion for the Federal Reserve.
Adding insult to injury, Reuters also reports that the Corker “reform” bill does not address the main culprit in the financial crisis — Fannie Mae and Freddie Mac. It does not address the issues associated with Community Lending that encouraged banks to lend to people who could never pay back their loans. It does not address ACORNS. All it does it layer more Washington bureaucracy on top of existing Washington Bureaucracy. Nice work, Bob.
The bill was flatlined and now Corker has revived it. His media fawning work will cost taxpayers for decades to come. It appears that Corker is officially off the conservative reservation.
Friday night on National Public Radio, a fitting place to announce an unprecedented growth in federal power, Sen. Chris Dodd praised his partner in crime Sen. Bob Corker for working together to create an “independent, autonomous, rule- writing entity, unlike anything we’ve ever had before.” That is exactly why Tea Party activists from across the Volunteer State gathered in front of Corker’s office this past week to protest his back room dealmaking.
Why would Corker ignore his constituents and abandon all conservative principles to work for legislation that earns him praise from Chris Dodd of all people? Here’s why.
The big banks and Wall Street firms support the President’s Financial Reform package. The House passed bill contains the mother of all bailouts — a $4 trillion authorization for the Federal Reserve to continue to bailout firms for decades to come. In fact, as conservatives in the House reminded us when the Obama/Frank bill was on the floor, this bill makes bailouts the permanent policy of the US government. And who gets those bailouts? The same banks and firms that support the bill. And who does Wall Street rain campaign contributions on? None other than Bailout Bob Corker.
Corker has raised over $3 million from Wall Street and related firms since being elected to the Senate. That’s a lot for a freshman Senator. It seems like Wall Street is finally getting a good return on their investment.
And what about creation of this “independent, autonomous, rule-writing entity, unlike we’ve ever had before?”
That entity won’t be regulating Wall Street. it will be regulating Main Street. Stores with layaway plans. Check cashing companies. Payday lenders. Debt settlement companies. Car Dealers and pawn shops (if their lobbyist written exemption falls out) will all be regulated by the federal government.
And that’s just for starters. How many government agencies do you know of that get less powerful as they go along? And how many can you think of that continue to grab more and more power over more and more parts of our lives?
And Bob Corker wants to add a new one. “unlike we’ve ever had before.”
So much for federalism. Wall Street has nothing to fear from the creation of the so-called “Consumer Financial Protection Agency.” We do.
It looks like Sen. Corker is willing to turn his back on the principles of smaller government and the free market to please his Wall Street friends. We hope we are wrong but the damning evidence suggests otherwise.
Friday night on National Public Radio, a fitting place to announce an unprecedented growth in federal power, Sen. Chris Dodd praised his partner in crime Sen. Bob Corker for working together to create an “independent, autonomous, rule- writing entity, unlike anything we’ve ever had before.” That is exactly why Tea Party activists from across the Volunteer State gathered in front of Corker’s office this past week to protest his back room dealmaking.
Why would Corker ignore his constituents and abandon all conservative principles to work for legislation that earns him praise from Chris Dodd of all people? Here’s why.
The big banks and Wall Street firms support the President’s Financial Reform package. The House passed bill contains the mother of all bailouts — a $4 trillion authorization for the Federal Reserve to continue to bailout firms for decades to come. In fact, as conservatives in the House reminded us when the Obama/Frank bill was on the floor, this bill makes bailouts the permanent policy of the US government. And who gets those bailouts? The same banks and firms that support the bill. And who does Wall Street rain campaign contributions on? None other than Bailout Bob Corker.
Corker has raised over $3 million from Wall Street and related firms since being elected to the Senate. That’s a lot for a freshman Senator. It seems like Wall Street is finally getting a good return on their investment.
And what about creation of this “independent, autonomous, rule-writing entity, unlike we’ve ever had before?”
That entity won’t be regulating Wall Street. it will be regulating Main Street. Stores with layaway plans. Check cashing companies. Payday lenders. Debt settlement companies. Car Dealers and pawn shops (if their lobbyist written exemption falls out) will all be regulated by the federal government.
And that’s just for starters. How many government agencies do you know of that get less powerful as they go along? And how many can you think of that continue to grab more and more power over more and more parts of our lives?
And Bob Corker wants to add a new one. “unlike we’ve ever had before.”
So much for federalism. Wall Street has nothing to fear from the creation of the so-called “Consumer Financial Protection Agency.” We do.
It looks like Sen. Corker is willing to turn his back on the principles of smaller government and the free market to please his Wall Street friends. We hope we are wrong but the damning evidence suggests otherwise.
Do Republicans Not Get It? Did they not pay attention to the thousands of tea parties this past year? Did they not see the hundreds of thousands of tea party protesters across the nation? Did they miss the million protesters who marched down the streets of Washington DC on September 12th?
Are the Republicans really that blind? Do they Not Care? Even awful Speaker Pelosi is warming up to the Nazis tea party protesters.
After all of the posturing and preening and shouting and yelling and marching and tea party protesting, America is about to get the whole Democrat agenda shoved down our collective throat. Barack Obama announced today that Democrats are going to use reconciliation to jam Obamacare through Congress and essentially nationalize one-sixth of the US economy. And now, Republicans are about to offer them the rest of the American economy on a silver platter thanks to Senator Bob Corker. Congress is currently working to create a whole new consumer protection division within the Federal Reserve. This new division will give the Fed more power and focus on consumer protection. And, a Republican, Bob Corker, is for some reason leading the charge to create this whole new bureaucracy. The Wall Street Journal reported:
Several senior Republicans have joined negotiations with Banking Committee Chairman Christopher Dodd (D., Conn.) over how to construct consumer-protection rules, potentially bringing more Republican votes to a broader revamp of finance rules—if Democrats can stomach more concessions.
“We’re very, very, very close to a deal,” Sen. Bob Corker (R., Tenn.) said in an interview.
The development came after a closed door meeting Tuesday night between Mr. Corker and Sens. Mitch McConnell (R., Ky.), Richard Shelby (R., Ala.), Judd Gregg (R., N.H.), and Mike Crapo (R., Idaho).
The meeting was called after a Wall Street Journal story Tuesday said Messrs. Corker and Dodd were near an agreement on a compromise to create a new consumer protection division within the Federal Reserve…
…On Wednesday, Treasury Secretary Timothy Geithner and White House senior advisor Valerie Jarrett met with consumer and public interest groups and said new consumer protection rules would be formidable.
At the meeting, Mr. Geithner said it was an “empty argument” that safety and soundness regulation couldn’t be separated from consumer protection, someone familiar with the meeting said. Treasury officials also said they would only support new rules if the agency had an independent leadership, budget and decision making powers, and the power to set rules and enforce them.
Grassroots conservatives are rightly up in arms over Senator Corker’s game of footsie with far left Democrat Chris Dodd on President Obama’s effort to impose a massive new regulatory scheme on America’s economy. Dodd, of course, is one of the architects of the current financial crisis. His decades long support of ACORN, Fannie Mae, Freddie Mac and the Community Reinvestment Act should have disqualified him from these negotiations in the first place. But, this is Washington, after all, and apparently Bailout Bob was willing to look the other way and turn the other cheek.
This was even after the House of Representatives passed a similar bill in December, but it received no Republican votes. Close to two dozen Democrats voted against it.
The House passed financial reform bill, crafted by none other than Barney Frank (D-MA) contained a permanent bailout fund for banks and Wall Street firms and created a new agency of government that would be allowed to regulate any and all business in America. It received no Republican votes and close to two dozen democrats opposed the legislation. But, it is alive today thanks to Bob Corker.
The ironically named Consumer Financial Protection Agency will pile a new bureaucracy on top of an existing bureaucracy. It will spend hundreds of millions of dollars imposing job killing regulations on small business. It will have the power to strip consumers of their freedoms and restrict credit opportunities for small business. And, there’s more. Also tucked in the bill is a clause that gives the Federal Reserve the authority to bailout businesses to the tune of an astonishing $4 trillion.
The bill seemed to be dead until Corker decided to grab favorable headlines from the New York Times. According to news reports, Corker’s solution to the problem is to move the new regulatory agency to the Federal Reserve as opposed to leaving it a stand alone agency. Corker is misleading his colleagues and the public by telling them that this will some how save money.
Let’s be clear, the bill contains bailouts for big banks and Wall Street firms and new red tape nightmares for main street businesses. What difference does the location of this new uber-regulatory bureaucracy make? The only thing this bill will save is jobs, paychecks, yachts and third vacation homes for Wall Street bankers and irresponsible CEOs.
The fact is we need to reduce the size and scope of government not allow a government takeover of the financial sector of the economy.
The word from the halls of the Capital is Corker is still trying to cut a deal. But, honestly, what can conservatives possibly get from such a deal? If you strip out the bailouts and the new Washington bureaucracies and regulations, there is nothing left. So, any deal will be a bad one. A quick look at Corker’s financial contributors leaves one wondering whether Corker supports Wall Street more than Main Street. He is giving those at the top a handout while giving the middle class the bill. And as far as the tea party movement. Corker will forfeit any political ground conservatives have gained back recently.
Call Bob Corker and tell him to Stop the Madness. (202) 224-3344
Democratic U.S. Senate candidate Alexi Giannoulias sought to blunt a potentially damaging political issue today about questions regarding his involvement in his family’s struggling bank, which he said he expects will likely fail in the coming months.
But questions were still left unanswered following a more than 70-minute meeting with the Chicago Tribune’s editorial board. Among them were exactly what Giannoulias knew about convicted bookmaker Michael Giorango’s criminal past when he received loans from Broadway Bank, and how many of the bank’s troubled loans were made while Giannoulias was working there.
Giannoulias also sought to explain nearly $70 million the bank paid out in dividends to him and his family in recent years, saying $29 million of that was taken out of the bank to diversify the family’s investments.
Giannoulias said he didn’t see the bank’s financial situation getting better as the election progresses.
“It’s quite likely that the bank will fail,” he said. “I hope I’m wrong. I hope they can raise the capital to keep the bank going and they’re fighting hard to do so but it’s tough out there for a lot of banks of which Broadway Bank is not immune to these same challenges.”
He said he would be willing to help the bank but also estimated that any money he could provide would be “under $1 million.” The bank must raise $85 million by April, according to a consent order with state and federal regulators.
Controlling obesity is all the rage now in America as, indeed, it should be. Feeding the American appetite with too many of the wrong kinds of calories is exacting a terrible toll on the health of Americans of all ages. Obesity, like cigarettes, kills. In recent years, Congress, along with a compliant President Bush and now with an enthusiastic President Obama, has been appeasing another kind of appetite with reckless abandon. The toll this fiscal obesity will exact from America and our people is incalculable and Jenny Craig will be of no help.
Clearly, most Americans do not want to be force fed programs they haven’t asked for and that they know neither they, their children nor their grandchildren can possibly afford. People throughout the country are beginning to dig in their heels and a growing number of congressmen and senators know it. Seventy years ago, Japanese Admiral Isoroku Yamamoto is quoted, following his successful and deadly attack on Pearl Harbor, “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.” It appears that the American electorate, long apathetic and used to acquiescing by default to reckless government spending may be awakening from its long slumber. Let’s hope so, for it is the last best hope we have to rein in the destructive behavior of so many of our elected representatives of both parties in Washington and the White House strategists who lead them on.
As we noted in this column two weeks ago, Moody’s has fired the first warning shot over the bow of our ship of state. The international credit-rating agency warned that America’s AAA credit rating would be in jeopardy (given our spiraling debt) if economic growth does not keep pace with the projections made by the Obama Administration. China and Japan, our largest sovereign creditors, fired two more warning shots at last week’s treasury auction when they decreased their purchases of U.S. debt. But is anyone in Washington listening?
Let us stipulate that our concern is not that America is in danger of defaulting on its ever-mounting debt as Greece and, perhaps, Spain, Italy, Ireland and Portugal might very well be. We will always pay our bills: even if we have to print the money with which to meet our obligations when they come due. Should our creditors here in America and those abroad, however, begin to worry that they will be paid back with dollars that are worth a lot less than the dollars they loaned us, they will demand a higher rate of interest to offset that risk. If our creditors, to whom we are more beholden than ever before, were to decide they want a substantially higher rate of return on their money than we currently pay (approximately 3.6% for 10 year maturities and 4.6% for 30 year maturities) every segment of our society could be drastically affected.
Of equal if not greater concern, however, is that the dollar’s continued position as the world’s reserve currency is no longer certain. As our deficit widens and our debt grows nations on whom we depend are beginning to explore alternatives to the dollar as the world’s reserve currency. This should be causing many sleepless nights for those in Washington who are responsible for the health of our economy. The loss of the dollar as the world’s reserve currency would not merely be a loss of prestige. Such an occurrence would cause the dollar’s purchasing power to plunge and affect the standard of living of nearly everyone. A reserve currency is the currency nearly all nations hold in order to transact all international business (such as for commodities) that are priced in the reserve currency of the day. Think oil, gold, copper, etc. In many instances it is the currency nations use to settle their debts as well, and it is also the currency nation’s hold for the proverbial rainy day. A transfer of the world’s reserve currency status from the dollar to, say, the Chinese renminbi would cause a run on the dollar as sovereigns began trading their collective trillions in dollars for renminbis. Loss of reserve currency status could represent a crisis of unimaginable proportions causing a sudden and precipitous drop in the value of the dollar. Far fetched? No, not at all. In fact, there is a serious move among a number of nations, including China, which during this century will become the world’s largest economy, to begin preparing for such a development. Nations on whom we depend for trade, loans and investment are eyeing developments in Washington with alarm. Again, we ask, is anyone in Washington listening?
While few people can really predict when and if such an adverse event might occur, there is no question that the odds go up as our national indebtedness goes up. And it is going up exponentially.
Our total debt is now as large as our entire economy, if we include what we owe here in America (to domestic holders of treasury obligations) and what we owe to China, Japan, the Saudis and an assortment of oil-supported sheikdoms and other smaller foreign creditors as well as what we owe to our own Social Security and Medicare trust funds and our collective state and municipal obligations. Greece, the basket case of Europe, has total debt of 108% of its economy. Our total debt stands at just a fraction under 100% (98.2% to be exact) of our entire economy ($14 trillion of total debt vs. $14.25 trillion of total economic output. While we suppose we can always cancel some (or all) of that portion of our debt that is the result of what our government has borrowed from the so-called Social Security and Medicare trust funds, this is not a pretty picture.
Carmen Reinhart and Kenneth Rogoff, economists at the University of Maryland and Harvard, respectively, in their recent book with the tongue-in-cheek title, “This Time is Different: A Panoramic view of Eight Centuries of Financial Crises,” sound an ominous alarm. They note that every time an economy begins precipitously to run up debt, various, so-called, experts are always there to provide comforting advice that “things are different” and we needn’t be concerned about the debt “this time.” The authors then go on to demonstrate, convincingly we think, that this invariably has been, and continues to be, just plain wrong. They found that, even in a developed economy, once public debt reaches 90 percent of economic output, it begins seriously to stifle economic growth. While we make no pretense of being qualified to attest to the findings of these accomplished economists, we get little comfort from the reassurances of the Obama Administration’s economists that, “this time it’s different.” We fear that it is not. We are spending with abandon and exaggerating (outrageously, we think) what this spending is accomplishing. “Hail Mary” passes rarely work in football and certainly never work as economic policy.
We have now spent (or committed to spend) nearly a trillion dollars to “stimulate” the economy (exclusive of the TARP bailouts and new stimulus proposals) and all we really have to show for it is the fastest increase in our deficit in history. Claims of jobs saved are fatuous. How do we even begin to assess the cost of a trillion dollars being vacuumed out of the capital markets by the government instead of being available for private investment and job creation in the private sector?
Harvard economics professor Robert Barro, writing in the Wall Street Journal last week took serious issue with Christina Romer’s (Chair of President Obama’s Council of Economic Advisors) estimates of the multiplier effect of government stimulus dollars. Professor Barro’s analysis indicates that, over five years, the President’s stimulus package trades $600 billion of public spending for $900 billion of private expenditure. It is, he notes, a bad deal.
Given that 77% of the stimulus money was still sitting in Washington at the end of last year, the notion that the stimulus program was putting people to work (net of jobs that otherwise would emerge in the private sector) in any significant way was patently absurd. As Democratic Senator Evan Bayh, one of the more respected and analytical members of the Senate, said when announcing his decision not to seek re-election, “if I could create one new job by working in the private sector, that would be one more job than Congress has created in the past six months.” Notice how no one mentions, “shovel-ready jobs” anymore. It was an empty sales line a year ago, and it’s an empty sales line now. But this time everyone knows it. We know that roughly 50% of the stimulus money will be directed to existing government agencies such as Health and Human Services and the Department of Education. Again, a tremendous increase in spending to existing government agencies disguised as economic stimulus. Worse yet this added spending will become the baseline for future budgeting.
It would be wrong and unfair to lay this gathering storm at the feet of President Obama. The storm clouds began gathering long before President Obama became president, indeed, long before President Obama was even old enough to vote. But President Obama came to office promising change and has governed, instead, by greatly compounding the errors of his immediate predecessor and most other democratic and republican administrations of recent decades.
It would take a courageous and masterful leader and a magical moment to say to the American people, “the government has made entitlement promises to you that we can’t keep…that we can’t afford, and that we can’t place on the shoulders of our children. We’re going to have to establish a “means test” for Social Security and Medicare and even the age at which our people will be eligible to begin receiving benefits. We’re also going to have to eliminate hundreds, maybe thousands, of programs that are wasteful or redundant or that we can do without. Henceforth, there can be no programs that are ‘untouchable.’”
It seems we will have to wait for such a leader and such a magical moment. We can only hope he or she arrives in time.
While the media and most of the public are consumed by the health care death march, the Senate is deep in negotiations to pass a sweeping re-regulation of the financial sector. As the public knows, ObamaCare is an attempt to regulate 1/6th of the US economy. The financial ‘reform’ proposal, though, will impact the other 5/6ths of the economy. In many respects, the financial services ‘reform’ is much more damaging to the economy and our future competitiveness. Worse, its passage is being aided by Bob Corker.
Sen. Bob Corker (R-TN) has snatched defeat from the jaws of victory with his complete capitulation and total surrender on the Financial Services bill. The bill, passed by the House with a $4 trillion bailout provision, making bailouts the permanent policy of the United States government, was on it’s last legs until Corker came to the rescue. Now the Washington Post and other are reporting that Corker and ethically-challenged, retiring Sen. Chris Dodd (D-CT) are on the verge of a deal to breathe life back into the regulatory and bailout scheme.
Here are some of the nuggets I gleaned from days spent reading Frank’s handiwork:
– For all its heft, the bill doesn’t once mention the words “too-big-to-fail,” the main issue confronting the financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward recovery.
– Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.
– Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well.
– The bill also allows the government, in a crisis, to back financial firms’ debts. Bondholders can sleep easy — there are more bailouts to come.
– The legislation does create a council of regulators to spot risks to the financial system and big financial firms. Unfortunately this group is made up of folks who missed the problems that led to the current crisis.
– Don’t worry, this time regulators will have better tools. Six months after being created, the council will report to Congress on “whether setting up an electronic database” would be a help. Maybe they’ll even get to use that Internet thingy.
Sources in the Senate have made conservatives aware of a sleight of hand that Sen. Corker and Dodd may use to try to get this bill through the Senate. The discussion draft contained the infamous bailout provisions. But we have been warned that the “compromise” may take the bailouts out so they can be inserted back into the bill through the House Senate conference committee.
Does this sound like a bill a senior Republican Senator should be trying to revive? Since when do Republicans believe in more government, more bureaucrats and more Washington red tape?
Bob Corker’s Senate office number is 202-224-3344.
While the media and most of the public are consumed by the health care death march, the Senate is deep in negotiations to pass a sweeping re-regulation of the financial sector. As the public knows, ObamaCare is an attempt to regulate 1/6th of the US economy. The financial ‘reform’ proposal, though, will impact the other 5/6ths of the economy. In many respects, the financial services ‘reform’ is much more damaging to the economy and our future competitiveness. Worse, its passage is being aided by Bob Corker.
Sen. Bob Corker (R-TN) has snatched defeat from the jaws of victory with his complete capitulation and total surrender on the Financial Services bill. The bill, passed by the House with a $4 trillion bailout provision, making bailouts the permanent policy of the United States government, was on it’s last legs until Corker came to the rescue. Now the Washington Post and other are reporting that Corker and ethically-challenged, retiring Sen. Chris Dodd (D-CT) are on the verge of a deal to breathe life back into the regulatory and bailout scheme.
Here are some of the nuggets I gleaned from days spent reading Frank’s handiwork:
– For all its heft, the bill doesn’t once mention the words “too-big-to-fail,” the main issue confronting the financial system. Admitting you have a problem, as any 12- stepper knows, is the crucial first step toward recovery.
– Instead, it supports the biggest banks. It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk. That is more than twice what the Fed pumped into markets this time around. The size of the fund makes the bribes in the Senate’s health-care bill look minuscule.
– Oh, hold on, the Federal Reserve and Treasury Secretary can’t authorize these funds unless “there is at least a 99 percent likelihood that all funds and interest will be paid back.” Too bad the same models used to foresee the housing meltdown probably will be used to predict this likelihood as well.
– The bill also allows the government, in a crisis, to back financial firms’ debts. Bondholders can sleep easy — there are more bailouts to come.
– The legislation does create a council of regulators to spot risks to the financial system and big financial firms. Unfortunately this group is made up of folks who missed the problems that led to the current crisis.
– Don’t worry, this time regulators will have better tools. Six months after being created, the council will report to Congress on “whether setting up an electronic database” would be a help. Maybe they’ll even get to use that Internet thingy.
Sources in the Senate have made conservatives aware of a sleight of hand that Sen. Corker and Dodd may use to try to get this bill through the Senate. The discussion draft contained the infamous bailout provisions. But we have been warned that the “compromise” may take the bailouts out so they can be inserted back into the bill through the House Senate conference committee.
Does this sound like a bill a senior Republican Senator should be trying to revive? Since when do Republicans believe in more government, more bureaucrats and more Washington red tape?
Bob Corker’s Senate office number is 202-224-3344.
A recent Pew survey revealed the nation’s big banks are drawing the most ire from the American public, and now that the Federal Reserve is poised to hand them another victory, it’s easy to see why Main Street’s anger burns deep.
Wednesday, Federal Reserve Chairman Ben Bernanke released a statement to the House Committee on Financial Services which detailed the accommodative policy the Fed implemented as a result of the Great Recession and outlined its exit strategy from that policy.
The objective of the Fed’s intervention was to alleviate the pressure on the balance sheets of the banks, which would provide them with the financial flexibility necessary to begin lending to consumers and businesses once again. To meet such an end, the Fed increased the size of its balance sheet through purchases of securities and real-estate loans from the banks, and decreased the interest-rate for interbank lending to nearly zero percent.
The banks’ first ‘Win’ came as a result of those sales to the Fed which produced billions of dollars in revenue. Afterwards, many of us were wondering why the banks weren’t lending again, despite raking in record profits, but the answer was simple. They quickly realized they had found themselves with a can’t loseproposition, as they could make guaranteed money instead of taking on more risk from lending to consumers and businesses during a period of economic uncertainty.
How could they do that?
They made the federal government their primary customer and charged them a higher interest rate than the artificially low rate the Fed had set as their cost to borrow. Additionally, they parked more than the federally mandated amount of reserve funds at the Fed, and received interest on those excess amounts.
The banks’ second ‘Win’ will come as a result of Bernanke’s proposed exit strategy, which calls for an increase on the interest rate the banks receive on the aforementioned excess reserves.
Why would the Fed want to do that?
Bernanke has to encourage the banks to keep their money parked at the Fed as opposed to filtering it into the economy through lending to prevent an increase to the money supply that would cause inflation.
So what will the banks do?
They’ll keep raking in the cash.
Their primary customer is poised to spend even more money, and they’ll be right there to lend it to them. Per their standard procedure, they’ll charge them a higher interest rate than their cost to borrow, and because of Bernanke’s incentive, they’ll keep even more money in the Fed’s coffers; the profit-making cycle repeats itself.
The government and Federal Reserve have forged a collective effort to stabilize and stimulate the economy, and in the process, they’ve unintentionally rewarded the banks for not engaging in their principal business and now the Fed is forced to financially incentivize them to continue to not lend to prevent another economic catastrophe.
While Main Street continues to be mired in a long losing streak, the banks remain undefeated at the expense of taxpayers; don’t expect those results from the Pew Survey to change anytime soon.
More than three-quarters of the $2 billion in federal stimulus funds intended to create green-energy jobs in the U.S. has gone to foreign-owned companies
George Orwell defined doublethink as “the power of holding two contradictory beliefs in one’s mind simultaneously, and accepting both of them.
When it comes to war, spending, and more, President Barack Obama’s 2010 State of the Union address showed that doublethink is alive and well in Washington, D.C.
Approximately two minutes. Written and produced by Paul Feine.
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Pollster Frank Luntz has confirmed what conservatives, Tea Party activists and, well, every other American not affiliated with Wall Street banks have known all along — voting for bailouts is a political death sentence.
Big Government has obtained a copy of a new poll conducted by The Word Doctors that should send shivers down the spine of proponents of the Financial Reform bill that passed the House of Representatives in December. The legislation created a $150 billion bailout fund for future bailouts for banks and corporations and authorizes the Fed to spend up to another $4 Trillion.
Luntz’s poll asked whether “you would be more or less likely to vote for your member of Congress if they voted for a Financial Reform bill that contained a fund to bail out banks and Wall Street?” The results: 5% more likely. 79% Less Likely. An incredible 52% of respondents said that they would be “much more likely” to vote against bailout supporters. A copy of the Luntz poll can be found here:
Luntz’s poll raises a critical question Democrats will soon have to face — when they finally shelve health care reform, what legislation should they try to move to next? Certainly, if they care about getting themselves re-elected this November, the Financial Reform Bill won’t be it. The House-passed bill is sitting on the Senate desk while Sen. Dodd and the President are strongly pushing the bill.
But even though Sen. Dodd and the President don’t seem to get it yet, they will likely hear about it soon. Readers report this ad running in several states:
Why is Rep. Jan Schakowsky trying to use Illinois taxpayers’ money to bail out ShoreBank?
Rep. Schakowsky and fellow Illinois Democrat, Sen. Dick Durbin, have pressured state officials to meet with the bank to discuss a $100 million bailout.
The reason ShoreBank is in trouble is quite simple: it made too many bad real estate loans, and fell below the capital requirements required by regulatory authorities.
Its political supporters point to its mission of helping borrowers in low-income communities. But ShoreBank is hardly the only struggling bank to serve those customers.
Why is Rep. Schakowsky only helping ShoreBank? After all, when the Bank of Lincolnwood failed last year, Rep. Schakowsky did not save it–and that bank, unlike ShoreBank, was in her own district.
The answer may lie in the history of campaign contributions by ShoreBank executives and employees.
Federal Election Commission records reveal that ShoreBank executives and employees gave thousands of dollars to Rep. Schakowsky and Sen. Durbin.
They also gave heavily to Barack Obama’s presidential campaign. Indeed, Crain’s Chicago Business reports that “President Obama and the first lady are former neighbors of ShoreBank executives.”
Other ShoreBank-related contributions include Democrats across the country and left-wing organizations such as MoveOn.org.
The ShoreBank bailout would seem to be more of the same Blagojevich-style, pay-to-play politics that Illinois has suffered under for too long.
The people of Illinois are tired of bailouts. We know that the $700 billion TARP bailout–which both Rep. Schakowsky and Sen. Durbin voted for–was a failure.
We know that Illinois–which cannot even afford to pay state pensions–cannot afford to start bailing out banks.
And we are tired of seeing our elected representatives using our tax dollars to help their cronies and contributors.
As usual, when they are caught, Rep. Schakowsky and her colleagues will point to their supposedly good intentions, and those of ShoreBank.
But this bailout is simply wrong. It is all about the greed of the politicians, not the needs of the people.
It will reward ShoreBank for making bad financial decisions, rather than encouraging responsible behavior to protect low-income customers and communities.
Just as we need to get rid of the policy of “too big to fail,” we need to stop the policy of “too connected to collapse.”
So, what to do to keep the rabble from voicing their displeasure? Blame someone else! Obama wants to tax the big bad banks. He says it’s to get our TARP money back and to reduce undue risks by the greedy bankers. The One wants you to believe that the big banks are the kind of guys who would take the last piece of pizza from the birthday boy at Chuck-E-Cheese (see above photo).
Obama has been strident in his criticism of bankers, calling them “fat cats” last month in an interview that aired on the eve of their visit to the White House. With public anger over the bailout still strong, Obama has embraced populist rhetoric in an effort to shame bank executives into paying back the government more quickly and their executives less lavishly.
At the White House on Monday, Obama spokesman Robert Gibbs jabbed at the perceived disconnect between Wall Street executives and their customers. The spokesman said the disparity angered his boss.
“I don’t know anybody, save for a few that work for those banks, that don’t get visibly angry … in reading those stories,” Gibbs said. “I think they’re not listening to the American people.”
The banks deserve some blame, but the government is much more responsible for our economic meltdown. Obama isn’t even telling us the details of his ‘tax-the-bank’ idea.
The idea received an early boost from Speaker Nancy Pelosi, the top Democrat in the House, where there have been calls for a hefty tax on bank bonuses.
“While we have not seen any specific language from the administration, Congress will certainly examine any serious proposals to lower the deficit and recoup even more of the TARP funds for the taxpayers,” said Nadeam Elshami, a spokesman for Pelosi, D-Calif.
If the purpose is to get the TARP money back from the banks, that’s almost done. Most of the banks have paid it back and the rest are working on it. The money we’ve totally flushed away is the stuff we gave out after we turned TARP into a giant slush fund – the bailouts to the auto companies, AIG, Goldman Sachs, etc.
If the purpose is to get banks to quit taking outrageous risks, I have a better solution – When questionable investments put banks at risk of failure…LET THEM FAIL. That will temper risk. Failed banks will be broken up and sold off to sound banks. Let capitalism take care of it. Get the government out of it.
The real purpose is to distract the voters from the failure of the stimulus, boost Obama’s approval ratings and create a new tax to redistribute the wealth. It certainly isn’t a way to grow the economy. There is a much better and cheaper way to do that, but that’s for another post.
Even though politicians already have flushed $400 billion down the rathole, the Obama Administration has announced that it will now give unlimited amounts of our money to prop up Fannie Mae and Freddie Mac, the two government-created mortgage companies.
While President Obama should be castigated for this decision, let’s not forget that this latest boondoggle is only possible because President Bush did not do the right thing and liquidate Fannie and Freddie when they collapsed last year. And, to add insult to injury, Obama’s pay czar played Santa Claus and announced that that a dozen top “executives” could divvy up $42 million of bonuses financed by you and me. Not a bad deal for a group of people that more properly should be classified as government bureaucrats.
Here’s an excerpt from the Washington Post about the Administration’s latest punch in the gut for taxpayers:
The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress. The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama’s current term. But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009. The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac’s chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.
Perhaps most surprising among my findings is the fact that a UAW-General Motors entity, the UAW-General Motors Human Resources, is listed here as a sponsor, alongside Ford and a few other organizations, of the Little Caesar’s Pizza Bowl (formerly known as the Motor City Bowl) to be played at Ford Field in Detroit Dec. 26.
This sponsorship deal makes me wonder how many football fans of the matchup between Marshall University and Ohio University will spend halftime visiting this sponsor’s exciting web site.
The Eagle Bank Bowl is set for Dec. 29 at RFK Stadium in Washington, D.C., and appears to be back stronger than ever in 2009. The bowl’s “strength”– not found in the battle between UCLA and Temple — could be due to the fact that it’s title sponsor, Bethesda, Md.-based Eagle Bancorp Inc., received $38.2 million via the Troubled Asset Relief Program, according to a Wall Street Journalreport early this year. [Note: From the strange-but-true department, the name of the bank's chairman and chief executive officer is -- drumroll, please -- Ron Paul.]
Judging by its web site, it appears no one but the federal government — which provided $3.55 billion in bailout funds to Capitol One — is helping the title sponsor of the Jan. 1 Capitol One Bowl pitting LSU against Penn State in Orlando. The good news: Over the summer, the bank paid back more than it received, according to this report.
The Detroit News reported last week that Motor City-based GMAC Inc., sponsor of the GMAC Bowl, could benefit from a bailout extension. To date, according to the newspaper, the company has received $13.5 billion in government support and has been in talks with the White House about an additional infusion of up to $5.6 billion. What might happen if an extension falls through before the Jan. 6 game between Troy and Central Michigan? Not much, I suspect.
Finally, after receiving a whopping $20 $25 billion in TARP funds, according to the aforementioned Journalreport, Citigroup officials promised yesterday (see this article) they’re going to pay back $20 billion soon. Good for them!
As the title sponsor of both the Rose Bowl(Jan. 1) and the BCS National Championship (Jan. 7) in Pasadena, Citi should be expected to spare no expense when it comes to putting on a good show. At a minimum, they should buy the Oregon Ducks some decent-looking uniforms to wear as they take on Ohio State in the “granddaddy” of bowl games and give the Texas cheerleaders gold-plated shovels to clean up Bevo’s mess after he sees how many points Alabama has pasted on his Longhorns after 60 minutes.
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