Photoshop/CoC card set credit: Tennyson Hayes
It’s not quite the Mother of All Distractions, but it’s up there. Maybe the First Cousin of All Distractions.
The White House unveiled its ballyhooed $90 billion plan to punish banks with a “Financial Crisis Responsibility Fee” this afternoon. It’s faker than the fake garden vegetables the First Lady served up on Iron Chef.
How does this fakery grow?
1. The bank tax will inevitably be passed on to consumers and the White House has no way of stopping them from doing the dumping.
2. The tax won’t apply to non-banks, black holes Fannie Mae and Freddie Mac, or the bailed-out auto companies.
3. This isn’t about getting “our money” back. It’s about redistributing it again under the guise of faux populism.
More to the point, this is what I call the Cover Tim Geithner’s A** Tax. Making banks the whipping boys takes the heat off Geithner for his incompetent, complicit, and transparency-subverting tenure as New York Federal Reserve chair.
Team Obama wants you to keep your eyes on its fatcat barbecue charade.
But don’t be distracted. Geithner will be on the hot seat next week in Congress. And that’s where the real scrutiny of “financial crisis responsibility” lies.
The WSJ weighs in on the secret backdoor bank bailout deals approved by the NYFed under Geithner:
Given the sweet deal and the fact that Mr. Geithner sought to keep secret the identities of the beneficiaries, logic would suggest that the AIG intervention was intended as a bailout for these counterparties. Supporting this conclusion is the fact that Mr. Geithner has sold his plan to regulate derivatives as a way to prevent such problems in the future. Yet when asked directly by the inspector general for the Troubled Asset Relief Program why he opted to buy out the counterparties at par, Mr. Geithner said “the financial condition of the counterparties was not a relevant factor.”
Then last November, he suggested that the systemic risk was in AIG’s traditional insurance business. “AIG was providing a range of insurance products to households across the country. And if AIG had defaulted, you would have seen a downgrade leading to the liquidation and failure of a set of insurance contracts that touched Americans across this country and, of course, savers around the world,” he said. So which was it?
Taxpayers also still haven’t been told why there couldn’t have been any sunshine on Mr. Geithner’s beloved AIG counterparties. If some of them really would have failed, with systemic consequences, why not announce that they were all getting a deal to bolster liquidity and allow them to resume lending? That is exactly what regulators had just done in October 2008 by naming recipients of TARP capital injections.
On the other hand, if the counterparties weren’t the systemic risk, then what’s the argument for regulating derivatives?
The evidence builds that AIG’s “systemic risk” wasn’t a mathematical answer to a rigorous and thoughtful review of data, but rather a seat-of-the-pants judgment by regulators in a panic. If that is the case, someone should ask Mr. Geithner why the American people should give him even more authority to make more such judgments from his hip pocket—with little public scrutiny.
Under the House regulatory reform, Mr. Geithner would chair a new Financial Services Oversight Council. The council could declare virtually any company in America a systemic risk, making them eligible for intervention on the taxpayer’s dime. The law firm Davis Polk reports that since this council is not an agency, it will not be subject to the Administrative Procedure Act, the Freedom of Information Act or the Sunshine Act, among other laws intended to allow citizens to scrutinize government.
It’s difficult to learn and apply the lessons of AIG because the New York Fed has done so much to conceal them. Mr. Towns appears to be getting closer to the truth, deciding yesterday to issue subpoenas focused on the New York Fed’s decision-making, as opposed to whatever it told AIG to say in public. Let’s hope lawmakers explore what the “systemic risk” actually was—and why Mr. Geithner should get nearly open-ended power to define it again.
Remember: As commenter Flyoverman put it best, “The only ethics committee with any clout is an informed electorate.”
Tom Elia on the same wavelength:
Obama Administration officials estimate that losses from the TARP program are around $120 billion, and argue this new tax will pay for those losses.
However, much of the estimated loss from TARP comes from the auto industry bailout.
So what appears to happening here is that the Obama Administration and congressional Democrats are attempting to levy a tax on financial institutions — some of which never received TARP funds, some which have already paid them back — in large part to pay for the bailout of the auto industry, a bailout which greatly favored the autoworkers’ unions, a Democratic Party constituency.
And they’ll use as political cover for this the populist anger — much of it deserved — over the financial bailout. However, make no mistake: much of this will in reality be a transfer of wealth from the financial industry to a Democratic Party voting bloc.
…Update: Here’s an ABC News interview with one of President Obama’s top advisors, Valerie Jarrett:
Note well Jarrett’s comment (at about 0:43), “…what I would say to them from a PR perspective is: How does it look to pass on those fees to your customers….”
Of course that’s exactly what the Obama Administration and the Democratic Party are doing to the US taxpayer in this obvious attempt to hide this payoff to its union constituency!