Crimes Against Liberty Read online

  It was also dishonest for Obama to call his tax a “fee.” As the Heritage Foundation’s Retirement Security and Financial Markets guru David C. John said, the “responsibility fee” is neither responsible nor a fee. However, “The White House needs a villain to blame for the nation’s continuing economic woes, and Treasury desperately needs revenues to reduce the massive deficits caused by the Obama administration’s spending policies.” A more candid explanation of the targets of the “fee,” suggested John, would mirror Willie Sutton’s answer to why he robbed banks: “Because that’s where the money is.”21

  Obama didn’t cotton to backtalk from the banks, slamming them again in his weekly radio address. “Like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect. We’re not going to let Wall Street take the money and run. We’re going to pass this fee into law. . . . If the big financial firms can afford massive bonuses, they can afford to pay back the American people. Those who oppose this fee have also had the audacity to suggest that it is somehow unfair. The very same firms reaping billions of dollars in profits, and reportedly handing out more money in bonuses and compensation than ever before in history, are now pleading poverty. It’s a sight to see.”22

  With Obama’s proposed tax, we saw, once again, that he was trying to pick the winners and losers, taxing some banks that had paid their debts in full, with interest, and exempting government-connected ones such as Fannie Mae, Freddie Mac, GM, and Chrysler, that still owed billions. Heritage Foundation expert on government regulation James Gattuso observed that while Obama claimed his new tax would “pay back the taxpayers who rescued them in their time of need . . . in truth, the new tax would do nothing of the kind. Mr. Obama knows that almost every major bank has paid back their bailout funds, with interest. Taxpayers made substantial profits on those repayments.” Heritage presented a chart, reprinted below, to illustrate Gattuso’s point that many banks that paid their debt would be taxed, and many who didn’t would be exempted.23

  Source: PmPublica. at http://bailoutpropublica.org/main/list/index. The Heritage Foundation

  This bank “fee” is manifestly unfair and ill-advised for other reasons as well. It would be imposed irrespective of whether a bank was profitable. Furthermore, the fee would come on top of other new proposed fees on the same institutions and of corporate income taxes they pay. Nor was the fee structured to deter further irresponsible risk taking. And, of course, who can possibly believe the White House’s claim that the fee would sunset after TARP deficits are eliminated a decade from now?24

  “TARP ON STEROIDS”

  Obama’s proposed bank tax was eventually rolled into a sweeping plan, unveiled in June 2009, to overhaul the financial system. Treasury secretary Tim Geithner—in keeping with the administration’s philosophy that Alinksyites should never let a crisis go to waste—emphasized that the banking system “was fundamentally too fragile and unstable and it did a bad job of protecting consumers and investors.... The damage of the crisis was just too acute. We are trying to move very, very quickly while the memory of the crisis is still in the forefront of people’s memory.”

  It was a stunningly candid admission. Furthermore, as a good central planner, Geithner complained that America’s financial system is much less centralized than other “mature” economies, and that we need a more centralized regulatory system to make this vast system accountable. The proposed bill would give a new council of regulators the authority to identify and monitor large financial firms (those “too big to fail”) that were in trouble, seize control of them, and wind them down to avoid their collapse, a scenario Geithner claimed would be limited to “extraordinary circumstances.”25 The plan contemplated covering the costs of such dissolutions by imposing a “fee” on firms with assets of $10 billion or more .26

  Obama and Geithner’s plan wasn’t initially well received in Congress. At a House Financial Services hearing, Republicans objected, Democrats were skeptical, and regulators were ambivalent. There was bipartisan concern that the plan would give both regulators and the executive branch unprecedented power. “I’m not a man that fears this administration or you,” said Democratic congressman Paul Kanjorski. “But I do fear the accumulation of power exercised by someone in the future that can be extraordinary.” Labeling the proposal “TARP on steroids,” fellow Democrat Brad Sherman told Giethner, “You’ve got permanent, unlimited bailout authority.” Geithner tendentiously objected that “the only authority we would have would be to manage their failure.”27

  In January 2010, Obama refined his “reform” plan, proposing what the Financial Times described as “the most far-reaching overhaul of Wall Street since the 1930s.”28 In addition to his new bank tax proposal, Obama proposed new bank regulations that would limit a bank’s investments and restrict the total size of financial institutions. The stated purpose of the regulations was to shore up financial institutions against another financial meltdown.

  ABC News’ Jake Tapper reported that Obama introduced the new regulations with “fiery, populist rhetoric . . . almost daring the financial sector to take him on.” Castigating profits and the private sector, Obama blamed deregulation and bank speculation for the financial crisis. He said, “As we dig our way out of this deep hole, it’s important we not lose sight of what led us into this mess in the first place. This economic crisis began as a financial crisis, when banks and financial institutions took huge, reckless risks in pursuit of quick profits and massive bonuses.” He said Wall Street was still operating by the same rules that led to the near-disaster, rules which allow “firms to act contrary to the interests of customers, to conceal their exposure to debt through complex financial dealings, to benefit from taxpayer-insured deposits, while making speculative investments; and to take on risks so vast that they pose threats to the entire system.”29

  Obama denounced the banks with the derogatory and bellicose language he had earlier used against insurance companies, declaring, “Never again will the American taxpayer be held hostage by a bank that is ‘Too Big to Fail.’” (emphasis added) Wall Street, he said, was “fighting reforms,” while there are “soaring profits and obscene bonuses at some of the very firms claiming that they can’t lend more to small businesses, they can’t keep credit card rates low, they can’t pay a fee to refund taxpayers for the bailout without passing on the cost to shareholders or customers—and that’s the claims they’re making.” He then lashed out at the “army” of Wall Street lobbyists who opposed his reform efforts (though it turned out they didn’t oppose it much, as described below).

  Once again echoing his attacks on insurers, he said, “If those folks want a fight, it’s a fight I’m ready to have.”30 He also asserted, “In recent years, too many financial firms have put taxpayer money at risk by operating hedge funds and private equity funds and making riskier investments to reap a quick reward. And these firms have taken these risks while benefiting from special financial privileges that are reserved only for banks.”31

  Not everyone swallowed Obama’s cavalier claim that deregulation caused the financial meltdown. The Heritage Foundation’s James Gattuso wrote, “Financial services were not deregulated during the Bush administration. If there ever was an ‘era of deregulation’ in the financial world, it ended long ago.... Not only was there little deregulation of financial services during the Bush years, but most of the regulatory reforms achieved in earlier years mitigated, rather than contributed to, the crisis.”32

  Obama’s reverse Midas touch kicked in as his ominous financial reform announcement caused the markets to plummet, losing 213 points and 216 points on two consecutive days.33 Despite the damage to stockholders—or perhaps because of it—leftists applauded the move.34

  “GET IN OUR WAY, AND WE’LL MOW YOU DOWN”

  Meanwhile, the House, led by Democratic congressman Barney Frank, passed its version of financial reform on December 11, 2009, by a margin of 223 to 202. Senator Dodd introduced the Senate versi
on—the Restoring American Financial Stability Act of 2010—the following March, hewing closely to Obama’s reworked reform plan. The Senate Committee on Banking, Housing, and Urban Affairs, on a straight party line vote of 13 to 10, rushed the bill through after only a twenty-one-minute markup. Republican senator Bob Corker commented, “It is pretty unbelievable that after two years of hearings on arguably the biggest issue facing our panel in decades, the committee has passed a 1,300 page bill in a 21-minute, partisan markup. I don’t know how you can call that anything but dysfunctional.” Senator Dodd warned Republicans that if they resisted his bill, they would suffer the same fate they did on the healthcare bill. In other words, as National Legal and Policy Center’s Carl Horowitz noted, “Get in our way, and we’ll mow you down.”35

  The administration threw its full weight behind the bill, which some began to call the “Obama-Dodd financial reform bill.” Treasury secretary Geithner argued the administration’s case in the Washington Post. He bragged that the Financial Crisis Responsibility Fee would make “the cost to American taxpayers . . . zero.” So banks that subsidize these losses are not American taxpayers? And they won’t pass these penalties on to consumers, who happen to be taxpayers? Why should banks that paid back their loans bear the cost more than anyone else? Indeed, in his piece, Geithner said, “A clear lesson of this crisis is that any strategy that relies on market discipline to compensate for weak regulation and then leaves it to the government to clean up the mess is a strategy for disaster.” Translation: free market bad, government good. Geithner closed with the administration’s typical Chicago-style machismo. “As the bill moves to the floor, we will fight any attempt to weaken it.”36

  As Geithner promised, the White House pushed the bill aggressively. White House blogger Jen Psaki wrote, “The reality is that there’s a clear choice in this debate: to stand with American families or stand on the side of big Wall Street banks and their lobbyists who are defending the status quo. Opponents of reform are protecting the big banks at the expense of American families—so they’re going to do whatever they can to keep the present system in place and leave the American taxpayer with the bill.”37

  This was the same Alinskyite strategy the White House employed against insurers when it was pushing ObamaCare, only this time its target was “fat-cat” Wall Street bankers. As was the case with ObamaCare, the administration claimed their opponents were in Wall Street’s pocket defending the status quo at the expense of the taxpayers. And whereas Obama called ObamaCare “insurance reform,” he called financial reform “Wall Street reform,” to capitalize on his demonization of the respective scapegoats of his “reform” efforts. He also deceitfully argued, as he had with ObamaCare, that insufficient regulation led to the problems, although the opposite was much more accurate.

  In the campaign against the bill’s opponents, the Chamber of Congress emerged as a key target. Obama attacked the Chamber for “spending millions on an ad campaign” opposing a Consumer Financial Protection Agency that the bill would create. Doing what he loves most, he attacked businesses, profits, “Wall Street” and lobbyists, claiming, “They’re doing what they always do—descending on Congress and using every bit of influence they have to maintain the status quo that has maximized their profits at the expense of American consumers . . . We have already seen and lived the consequences of what happens when there is too little accountability on Wall Street and too little protection for Main Street, and I will not allow this country to go back there.”38

  The next week, Politico reported that the White House and congressional Democrats were working to circumvent the Chamber of Commerce by going directly to the CEOs of major U.S. corporations. Since June, administration officials had met with executives from more than fifty-five companies. The Chamber accused the administration of launching a “frontal assault against free enterprise and the Chamber of Commerce” and trying to divide the business community in order to weaken opposition to ObamaCare, just as it had done with the cap and trade bill. Democrats painted the Chamber’s opposition as ideological rather than a matter of promoting the most favorable business environment.39 But admittedly, the modern liberal establishment’s hostility to the free market makes such a distinction moot.

  With Obama’s newfound confidence and a new spring in his step following passage of ObamaCare, he proceeded even more aggressively with his statist agenda. In March 2010, he renewed his attack on the Chamber for continuing to resist the financial reform package. Deputy Treasury Secretary Neal Wolin essentially accused the Chamber of lying in its opposition to “reform.” Wolin said, “The chamber has every right to oppose those policies with which its members disagree. But as a leading, respected institution, the chamber also has an obligation to be honest with you, its members, and with the American people.” It should “engage in a debate on the merits, not on the basis of misinformation.”40 He added, “It is so puzzling that despite the urgent and undeniable need for reform, the Chamber of Commerce has launched a $3 million advertising campaign against it.” Following Wolin’s remarks, Bruce Josten, the chamber’s top lobbyist, issued a statement describing the speech as “political grandstanding and distortion of facts.”41

  Administration officials announced Obama planned on leading a series of outside-the-beltway rallies for his financial regulatory reform efforts and to pressure Senate Republicans to get on board, in the same way he did with ObamaCare. Convinced Obama had regained policy momentum after passing healthcare, his aides believed the push for financial reform would boost his approval ratings. Obama’s campaign arm, Organizing for America, would coordinate the effort. “We cannot delay action any longer,” said Obama in an e-mail.42

  Seeking to create a sense of urgency, Obama argued a crisis would recur if all the essentials of his proposal were not passed immediately. In his radio address on April 17, 2010, he declared, “Every day we don’t act, the same system that led to bailouts remains in place, with the exact same loopholes and the exact same liabilities. And if we don’t change what led to the crisis, we’ll doom ourselves to repeat it.” If another crisis occurs, he claimed, “taxpayers” would be left “on the hook.” Obama also threatened to veto the financial overhaul bill if it didn’t include his proposal to authorize the government, for the first time ever, to regulate “derivatives.” As with ObamaCare, he paid superficial lip service to a call for bipartisanship, but stated in plain terms that Democrats were prepared to go forward by themselves. “One way or another, we will move forward,” he insisted. “This issue is too important.”43

  UNLIMITED BAILOUT AUTHORITY

  So what exactly would the Senate bill do? According to Carl Horowitz, it is “an unabashed attempt to bring virtually the entire financial services industry under federal heel—the portion not already under it.” The bill would create a new regulatory agency, the Consumer Financial Protection Bureau, that would have rule-making authority and enforcement powers apart from those of the Fed to monitor financial firms that have at least $10 billion in assets. The bill would also codify “the Volcker Rule,” which would restrict banks from making certain types of speculative investments, such as hedge funds and derivatives, that are not made on behalf of consumers.

  Most important, Dodd’s bill would create a new bureaucracy called the Office of Financial Research, which would be the driving force behind a new body called the Financial Stability Oversight Council (FSOC). A nine-member board, the council would be empowered to place risky financial firms—at its discretion—in receivership. It would monitor the entire financial services marketplace to assess threats to financial stability and recommend new regulations to be written by the appropriate federal financial agencies. The FSOC would have subpoena power and the authority to collect any and all information from “any financial company” to analyze whether its business practices might threaten financial stability. In fact, it would monitor the entire financial services marketplace to identify potential risks to the financial stability of the United States.

/>   For its part, the Office of Financial Research could require companies to submit periodic and other reports to assess whether they could be a threat to the financial stability of the United States. This is a dangerous expansion of federal power in an effort that has little hope of success—Heritage Foundation expert James Gattuso notes that no regulators have successfully predicted threats to financial stability in the past. Gattuso dismisses all this “process” in the bill as mere political theater by Dodd and company.44 Alternatively, Obama and Dodd may understand the data won’t be useful, but that the expansive powers the bill authorizes will make it that much easier for the government to assert control of companies and micromanage them at will based on subjective judgments that they pose an economy-wide threat.

  Initially, the bill would establish a revolving emergency loan fund of up to $50 billion for “emergencies” (as defined by Congress) to use to close or restructure distressed financial firms.45 Promising the fund would only be used to wind down failing firms, Democrats claimed the regulators would have little flexibility in how it was allocated because its purpose was not to bail out companies, but to keep firms afloat while the government liquidated them. At any rate, the provision authorizing the fund was later removed in an effort to mollify opponents who argued it would amount to a permanent TARP fund since Congress would have the fund at its disposal, without having to pass authorizing legislation each time.