Looming up – a permanent TARP 1

The financial regulation bill is another huge threat to America’s painfully diminished prosperity, and so ultimately to Big Business and Big Labor.

But Big Business and Big Labor cannot see that, being chronically short-sighted. Contrary to Obama’s contention, they actually welcome the legislation.

The Heritage Foundation examines the bill which it calls, with good reason, a “Wall Street Bailout Bill” – a permanent TARP. And that, it says, is “what Wall Street wanted all along”.

Speaking to an audience of big business and big labor executives (including Goldman Sachs’ Lloyd Blankfein, Bank of America’s Bruce Thompson and SEIU’s Andy Stern) at New York’s Cooper Union, President Barack Obama noted “the furious efforts of industry lobbyists to shape” the financial regulation bill “to their special interests.” Obama then admitted, “I am sure that many of those lobbyists work for some of you. But I am here today because I want to urge you to join us, instead of fighting us in this effort.” Obama should have saved his breath. Wall Street and big labor lobbyists have already joined forces to make sure the current Senate legislation has become a Wall Street Bailout Bill.

Big labor’s ties to this White House are already well documented. Less known is just how close Obama administration interests align with the big firms that benefit most from the TARP bailout. The Washington Examiner reports that at Goldman Sachs, the nation’s largest investment bank, four of the five in-house lobbyists were Democratic Capitol Hill staffers — the remaining one gave $1,000 to Hillary Clinton last election. And USA Today notes that Goldman Sachs alone has given nearly $900,000 since January 2009 to congressional candidates, with 69% of that cash lining Democrat pockets. Finally, then-candidate Obama collected almost $1 million from Goldman executives and employees in 2008, more than the combined Goldman haul of every Republican running for president, Senate and the House.

So what have Wall Street lobbyists bought with their campaign cash and high priced lobbyists? A bill that gives permanent TARP-like authority to Washington regulators, thus enshrining Washington as a permanent bailout machine. Specifically, the bill:

Creates a protected class of too big to fail firms. Section 113 of the bill establishes a “Financial Stability Oversight Council,” charged with identifying firms that would “pose a threat to the financial security of the United States” if they encounter “material financial distress.” While these firms would be subject to enhanced regulation, such a designation would also signal to the marketplace that these firms are too important to be allowed to fail and, perversely, allow them to take on undue risk.

Creates permanent bailout authority. Section 204 of the bill authorizes the Federal Deposit Insurance Corporation (FDIC) to “make available … funds for the orderly liquidation of [a] covered financial institution.” Although no funds could be provided to compensate a firm’s shareholders, the firm’s other creditors would be eligible for a cash bailout. The situation is much like the bailout AIG in 2008, in which the largest beneficiaries were not stockholders but rather other creditors, such as Deutsche Bank and Goldman Sachs.

Provides for seizure of private property without meaningful judicial review. The bill, in Section 203(b), authorizes the Secretary of the Treasury to order the seizure of any financial firm that he finds is “in danger of default” and whose failure would have “serious adverse effects on financial stability.” This determination would be virtually irreversible in court.

Establishes a $50 billion fund to pay for bailouts. Funding for bailouts is to come from a $50 billion “Orderly Resolution Fund” created within the U.S. Treasury in Section 210(n)(1), funded by taxes on financial firms. However, according to the Congressional Budget Office, the ultimate cost of bank taxes will fall on the customers, employees and investors of each firm.

Opens a “line of credit” to the Treasury for additional government funding. Under Section 210(n)(9), the FDIC is effectively granted a line of credit to the Treasury Department that is secured by the value of failing firms in its control, providing another taxpayer financial support.

Authorizes regulators to guarantee the debt of solvent banks. Bailout authority is not limited to debt of failing institutions. Under Section 1155, the FDIC is authorized to guarantee the debt of “solvent depository institutions” if regulators declare that a liquidity crisis (“event”) exists.

Imposes one-size-fits-all reform in derivative markets. … The Senate bill would require virtually all derivative contracts to be settled through a clearinghouse rather than directly between the parties. Applying such ill-designed blanket regulation would make financial derivatives more costly, more difficult to customize, and, consequently, less widely used—which would increase overall risk in the economy.

According to Rasmussen Reports, 64% of Americans are not confident that policymakers in Washington know what they’re doing with regards to Wall Street. They have every reason to be concerned. … The bill Obama is pushing would empower Secretary Geithner to repeat the AIG bailout ad infinitum. No need to ever go back to Congress for a new TARP. The Senate bill is a permanent TARP. Which is exactly what Goldman Sachs and the rest of their Wall Street lobbyists wanted all along.

Less free, therefore less prosperous 0

We agree wholly with the opinion we quote here, though the author does not seem to believe as we do that Obama does not want America to be free. He is a collectivist, a redistributionist, a socialist. To reduce individual freedom, to replace the free market with centralized control of the economy, to expand government is what he is about.

From the Washington Times:

Consider our recent economic policy. In late 2008, the specter of a financial meltdown triggered dangerous decisions under President Bush. He approved an unprecedented intervention in the financial sector – the $700 billion Troubled Asset Relief Program – which actually fed the crisis. Instead of changing course, President Obama not only doubled down on those decisions, but went even further, in the belief that only bigger government can “lift us from a recession this deep and severe.” …

In December, the U.S. economy lost an additional 85,000 jobs. Despite all the bailouts and stimulus spending, the economy shed 3.4 million net jobs in 2009. But while employment has shrunk, the federal deficit has ballooned. One year after Mr. Obama took office, the deficit has grown to $1.4 trillion. His 10-year budget will add $13 trillion to the national debt by 2019. …

The bad news is that the United States is falling behind. The 2010 Index of Economic Freedom, released Wednesday, finds that the U.S. experienced the most precipitous drop in economic freedom among the world’s top 20 economies (as measured by the gross domestic product). The decline was steep enough to tumble the U.S. from the ranks of truly “free” economies. We are now numbered among the ranks of the “mostly free” – the same as Botswana, Belgium and Sweden. Canada now stands as the sole beacon of economic freedom in North America, getting a higher score on the economic-freedom Index than the United States.

On the index’s 100-point scale of economic freedom, the U.S. fell 2.7 points. Canada’s score dropped, too, but only one-tenth of a point. Meanwhile, countries such as Germany, France, Poland, Japan, South Korea, Mexico and Indonesia managed to maintain or even improve their scores, despite the economic crisis.

Why? In large measure, it’s because of the way Washington has exacerbated the financial and economic crisis since 2008. By June of last year, when we cut off data collection in order to begin our analysis, Washington’s interventionist policies had already caused a decline in seven of the 10 categories of economic freedom we measure. Particularly significant were declines in financial freedom, monetary freedom and property rights.

Conditions attached to large government bailouts of financial and automotive firms significantly undermined investors’ property rights. Additionally, politically influenced regulatory changes – such as the imposition of executive salary caps – have had perverse effects, discouraging entrepreneurship and job creation and slowing recovery. On top of this, we had massive stimulus spending that is leading to unprecedented deficits….

We are heading the wrong way. The index, co-published annually by the Heritage Foundation and the Wall Street Journal, has become a “leading indicator” of economic vitality, but other surveys also show that when economic freedom drops, falling opportunity and declining prosperity follow. Unless Washington takes steps to reverse the poor decisions it has made, Americans can expect a long and difficult time ahead.

The good news is that we’ve been here before, and we’ve turned things around before. There’s no reason we can’t do that again. Poll after poll demonstrates that the American people understand this, even if their politicians don’t. They clearly want Washington to gather up the political will to do things such as lowering taxes and reducing regulation and massive spending that feeds the federal debt. We need to unleash the power of the market to create jobs and to reclaim our competitive edge in the global economy. …

The less government intervenes in our lives and our economy, the freer and more prosperous we can become. The choices Mr. Obama takes in the future will determine whether America remains a land of opportunity and can reclaim its international reputation as “the land of the free.”

View the Index of Economic Freedom list here.

Behind the smokescreen 1

 … Obama and the Democrats are steadily pursuing their sinister agenda. 

Michelle Malkin writes (see the whole article here):

I ask you now to turn away from the bogus bonus smokescreen over $165 million in taxpayer-backed compensation packages for AIG employees. It is a pittance compared to the gargantuan spending spree happening right under our noses. The AIG bonus price tag amounts to one tenth of 1 percent of the total AIG giveaway ($85 billion in September, $37.8 billion in October; $40 billion in November; $30 billion in early March), which took place with the assent of a Republican administration, a Democratic administration and the congressional leadership of both parties.

Taxpayers might be less skeptical of the born-again guardians of fiscal responsibility if these evangelists were actually practicing what they preached. While the Obama administration now issues impassioned calls to stop rewarding failure, they moved Thursday to dump another $5 billion into the failing auto industry. That’s on top of Thursday’s announcement by the Federal Reserve to print $1 trillion to buy Treasury bonds and mortgage securities sold by the government – which no one else wants to buy.

Financial blogger Barry Ritholtz tallied up $8.5 trillion in bailout costs by December 2008 between Federal Reserve, FDIC, Treasury and Federal Housing Administration rescues (not including the $5.2 trillion in Fannie and Freddie portfolios that the U.S. taxpayer is now explicitly responsible for). Then there’s the (at least) $50 billion proposed by Treasury Secretary Tim Geithner in February to bail out home owners and lenders who made bad home loan decisions, which would be just a small sliver of the $2.5 trillion he wants to spend on the next big banking bailout, which would draw on the second $350 billion of the TARP package over which an increasing number of Chicken Little lawmakers are having buyer’s remorse.

Phew. We’re not done yet: As AIG-bashing lawmakers inveighed against wasted taxpayer funds and lamented the lack of accountability and rush to judgment that led to passage of the porkulus bill that mysteriously protected the bonuses, the Senate quietly passed a $10 billion lands bill stuffed with earmarks and immunized from amendments. GOP Sen. Tom Coburn, fiscal conservative loner, pointed out that none of the provisions for special-interest pork projects – including $3.5 million in spending for a birthday bash celebrating the city of St. Augustine, Fla. – was subject to public hearings. That’s on top of the pork-stuffed $410 billion spending bill passed two weeks ago.

Oh, and did I mention that the House passed a $6 billion volunteerism bill (the "GIVE Act") on Wednesday to provide yet another pipeline to left-wing advocacy groups under the guise of encouraging national service?

Also coming down the pike: the Obama administration’s "cap-and-trade" global warming plan, which Hill staffers learned this week could cost close to $2 trillion (nearly three times the White House’s initial estimate) and the administration’s universal health care scheme, which health policy experts reported this week could cost about $1.5 trillion over the next decade.

It is no wonder that when earlier this week Vice President Joe Biden told local officials in Washington that he was "serious, absolutely serious" about policing wasteful spending in Washington, he was met with the only rational response his audience could muster: laughter.

Posted under Commentary by Jillian Becker on Friday, March 20, 2009

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Frankly corrupt 0

 From The Blog of the Weekly Standard:

The Wall Street Journal reports on the suspicious case of OneUnited Bank, which received a TARP bailout thanks to Barney Frank, despite running afoul of state and federal regulators due to shady investing and lending practices, as well as the perks it granted to senior executives. The case is an object lesson on the opportunities that massive bills like TARP create for payoffs by those in power, and the power to hide those payoffs. First, the background:

 Troubled OneUnited Bank in Boston didn’t look much like a candidate for aid from the Treasury Department’s bank bailout fund last fall…

Nonetheless, in December OneUnited got a $12 million injection from the Treasury’s Troubled Asset Relief Program, or TARP. One apparent factor: the intercession of Rep. Barney Frank, the powerful head of the House Financial Services Committee.

Mr. Frank, by his own account, wrote into the TARP bill a provision specifically aimed at helping this particular home-state bank. And later, he acknowledges, he spoke to regulators urging that OneUnited be considered for a cash injection.

The Journal later described the provision Frank inserted into the bill to help UnitedOne. Frank apparently recognized that it would prompt unpleasant ethical questions if he simply earmarked money for UnitedOne, so instead he created a pool that would benefit the bank without having to name it:

 Mr. Frank says that in order to protect OneUnited bank, he inserted into the bill a provision to give special consideration to banks that had less than $1 billion of assets, had been well-capitalized as of June 30, served low- and moderate-income areas, and had taken a capital hit in the federal seizure of Fannie Mae and Freddie Mac.

Frank saw fit to provide this legup to OneUnited despite it running afoul of federal regulators:

 The allegations against the bank included "operating without effective underwriting standards and practices," "operating without an effective loan documentation program" and "engaging in speculative investment practices."

The action also alleged excessive executive compensation. The FDIC ordered OneUnited to "sell all bank-owned automobiles," and to require that executives reimburse the company for any vehicles that had been purchased. The Boston Business Journal reported in November that the bank owns a 2008 Porsche sport-utility vehicle that is registered at the address of OneUnited CEO Kevin Cohee.

The FDIC also ordered the bank to stop paying for a beachfront house in Santa Monica that, according to the Boston Business Journal, was purchased for more than $6 million in early 2007 by a group that included Cohee and his wife Teri Williams, the bank’s president.

Posted under Commentary by Jillian Becker on Sunday, January 25, 2009

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Corruption as usual 0

 They’re doling it out to their friends. From Power Line:

Barack Obama says his administration represents the end of "business as usual" in Washington. So far that appears to be true. What’s happening these days is considerably worse than what has previously passed for standard practice. Currently, the politically powerful are lined up to receive billions in federal bailout funds.Glenn Reynolds best described what is going on in Obama’s Washington:

      This is not so much a stimulus, as a massive transfer of wealth from the politically unconnected to the politically connected.

Posted under Commentary by Jillian Becker on Friday, January 23, 2009

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