WSJ: Mean Street: Obama is Killing America by Killing Wall Street
By Evan Newmark
What has become of America?
Today, Goldman Sachs CEO Lloyd Blankfein announced record annual profits of $13.4 billion for his bank.
He has repaid the U.S. taxpayer $11.42 billion for taking TARP money he didn’t want.
He will contribute another $6.4 billion in taxes to the general public. And within weeks, if President Obama gets his way, Blankfein has a good shot at becoming the most hated man in our nation.
Apparently, this is now how we treat success in America. We damn it, and then we punish it by enacting loopy, politically expedient measures such as caps on Wall Street trading and principal investments.
Why is our country so self-destructive?
We need people to come together, but we engage in populist divisiveness. We need millions of jobs, but we kill the incentives and destroy the capital that will create them.
Please don’t accuse me of not “getting it.” I do “get it.” I “get” that Main Street is suffering. I “get” that Wall Street is full of selfish, greedy people. I “ get” that Wall Street engages in reckless trading. I “get” that no bank should be too big to fail.
But does anyone actually believe the new White House war on Wall Street will remedy any of that? I know I don’t.
This war is about politics. It’s about a big election loss in Massachusetts. It’s about pushing the blame for the nation’s misery from Washington onto Wall Street.
Is President Obama talking to Tora Bora terrorists or Park Avenue bankers when he says: “So if these folks want a fight, it’s a fight I’m ready to have.”
Unfortunately, it’s a fight — that at least on the PR front — Washington is already winning. Just read today’s subdued Goldman Sachs earnings release.
Total profits were a “record” at the bank, even if earnings per share weren’t. But you wouldn’t know that from the Goldman press release. Instead, the big PR highlight is “Compensation and Benefits Down By $4 billion or 20% From 2007. Lowest Annual Compensation.”
How perverse. Job creation in our economy comes from profits and growing incomes. But here is America’s best-run company almost ashamed of its profits and bragging about how much less it’s paying its people.
Make no mistake — this war will damage the nation’s psyche. Just look at today’s stock market. In fact, the war’s unforeseen consequences are just now beginning to appear .
It’s bound to get very, very messy because in fact, contrary to the President’s assertion, the 2008 collapse had little to do with the dissolution of Glass-Steagall or proprietary trading by banks.
Sure, Wall Street was way too vulnerable because it was way too leveraged. But AIG wasn’t a bank. Neither Lehman Brothers nor Bear Stearns took consumer deposits. And the hundreds of billions in losses at Fannie Mae and Freddie Mac — as well as the destruction of Wachovia, Washington Mutual and Countrywide had nothing to do with prop trading. That was caused by banks lending money to millions of Americans to buy houses they couldn’t afford. You won’t hear much of that coming from Washington. After all, “It’s Actually Your Fault, America” is not a good slogan for a re-election campaign.
Friday, January 22, 2010
Tuesday, January 12, 2010
Fed Profits, Let's Tax Again
Hank Paulson, the former Secretary of the Treasury, and Ben Bernake, the Chairman of the Federal Reserve, have come under tremendous reputational pressure in the last month for their handling of the economic crisis.
Recall WAY back in 2008, when the world was on fire. Lehman Bros. had failed, Morgan Stanley and Goldman were on the brink. AIG needed saving. I argued here that the TARP (and other alphabet soup on Fed actions) was good both for the economy and the taxpayer. It was money well spent (unlike the crap that was the Federal Stimulus bill).
Fast forward to now. Today, it was reported that the Federal Reserve made record profits from their extreme market crisis actions. They reported a $45 billion profit in 2009. That profit will be distributed to the Treasury. To quote the Washington Post, "The numbers are good news for the federal budget and a sign that the Fed has been successful...in protecting taxpayers as it intervenes in the economy." The Fed's aggressive action of buying mortgage-backed securities and other collateral from the banking system and issuing emergency loans to banks was quite effective.
Although the Fed recorded a $3.8 billion decline in the value of the loans it made in bailing out Bear Stearns and AIG, but that loss was offset by $4.7 billion in interest payments from those loans.
That's just the Fed, you say? True. But it was also reported in December that $165 billion of bank TARP funds have been returned - almost three quarters of the money distributed to banks. As per MarketWatch.com, "Bank investments of $245 billion in Treasury's 2009 fiscal year were initially projected to cost $76 billion, but are now forecast to generate a profit. 'Taxpayers have already received over $16 billion in profits from all TARP programs and that profit could be considerably higher as the Treasury sells additional warrants in the weeks ahead,' the Treasury said in a statement. "
TARP hasn't been all roses. The mistake using TARP money for other worthless items not on the original agenda like bailing out the auto industry and giving more money to AIG. Nevertheless, the White House has asked to use the returned TARP money for other hairbrained items. But clearly the banks will get some vindication, right?? ah... No.
WHY WASTE GOOD POPULIST RHETORIC EVEN IF THE FACTS DON'T SUPPORT IT?
NY Times - Obama Considers Bank Fee to Help Cut Deficit January 11, 2010, 11:39 am —
President Obama is likely to propose a fee on financial institutions to help reduce the federal deficit when he releases his budget plans in February... The bank fee would recover some of the money that taxpayers put up to bail out the financial system after its near-collapse in the fall of 2008, a rescue effort that has contributed to the largest annual budget deficits since World War II, The New York Times’s Jackie Calmes reports from Washington...With popular anger building as big banks show profits and pay sizable bonuses while unemployment remains high, the Obama administration has come under pressure at home and abroad to support a financial transactions tax on institutions and to heavily tax their executive compensation.
This is WRONG is so many ways! Here's two: 1. ummm, the BANKS aren't the one's the are going to blow up the deficit. Meanwhile, the $80 billion TARP investment in GM and Chrysler is likely ... GONE. AIG... who knows. 2. Anyone who understand economics knows that fees charged to a business institution are a hidden tax on the consumer of that institution. Fortunately (read: sarcasm), the tax won't apply to community banks. So, if you bank at Citibank, you'll help fund the deficit, but if you bank at Lakeshore Community Bank, you won't. Absurd.
Recall WAY back in 2008, when the world was on fire. Lehman Bros. had failed, Morgan Stanley and Goldman were on the brink. AIG needed saving. I argued here that the TARP (and other alphabet soup on Fed actions) was good both for the economy and the taxpayer. It was money well spent (unlike the crap that was the Federal Stimulus bill).
Fast forward to now. Today, it was reported that the Federal Reserve made record profits from their extreme market crisis actions. They reported a $45 billion profit in 2009. That profit will be distributed to the Treasury. To quote the Washington Post, "The numbers are good news for the federal budget and a sign that the Fed has been successful...in protecting taxpayers as it intervenes in the economy." The Fed's aggressive action of buying mortgage-backed securities and other collateral from the banking system and issuing emergency loans to banks was quite effective.
Although the Fed recorded a $3.8 billion decline in the value of the loans it made in bailing out Bear Stearns and AIG, but that loss was offset by $4.7 billion in interest payments from those loans.
That's just the Fed, you say? True. But it was also reported in December that $165 billion of bank TARP funds have been returned - almost three quarters of the money distributed to banks. As per MarketWatch.com, "Bank investments of $245 billion in Treasury's 2009 fiscal year were initially projected to cost $76 billion, but are now forecast to generate a profit. 'Taxpayers have already received over $16 billion in profits from all TARP programs and that profit could be considerably higher as the Treasury sells additional warrants in the weeks ahead,' the Treasury said in a statement. "
TARP hasn't been all roses. The mistake using TARP money for other worthless items not on the original agenda like bailing out the auto industry and giving more money to AIG. Nevertheless, the White House has asked to use the returned TARP money for other hairbrained items. But clearly the banks will get some vindication, right?? ah... No.
WHY WASTE GOOD POPULIST RHETORIC EVEN IF THE FACTS DON'T SUPPORT IT?
NY Times - Obama Considers Bank Fee to Help Cut Deficit January 11, 2010, 11:39 am —
President Obama is likely to propose a fee on financial institutions to help reduce the federal deficit when he releases his budget plans in February... The bank fee would recover some of the money that taxpayers put up to bail out the financial system after its near-collapse in the fall of 2008, a rescue effort that has contributed to the largest annual budget deficits since World War II, The New York Times’s Jackie Calmes reports from Washington...With popular anger building as big banks show profits and pay sizable bonuses while unemployment remains high, the Obama administration has come under pressure at home and abroad to support a financial transactions tax on institutions and to heavily tax their executive compensation.
This is WRONG is so many ways! Here's two: 1. ummm, the BANKS aren't the one's the are going to blow up the deficit. Meanwhile, the $80 billion TARP investment in GM and Chrysler is likely ... GONE. AIG... who knows. 2. Anyone who understand economics knows that fees charged to a business institution are a hidden tax on the consumer of that institution. Fortunately (read: sarcasm), the tax won't apply to community banks. So, if you bank at Citibank, you'll help fund the deficit, but if you bank at Lakeshore Community Bank, you won't. Absurd.
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