TARP in President’s 2013 Budget?

President Obama will present his budget to Congress tomorrow.

The budget will contain a long laundry list of proposals specifically designed to help get the President reelected.

One of those popular proposals is a “Financial Crisis Responsibility Fee”:

The tax will raise $61 billion over 10 years from large financial institutions to help offset the cost of the TARP bailout and Obama’s mortgage refinance programs.
Charles Riley, CNNMoney, 2/10/2012

Steven Thomma of McClatchy Newspapers says President Obama is asking to levy the fee “to offset the cost of the bank bailout“.

If levied a fee, nobody will shed a tear for the big banks… and shouldn’t.

But this proposal perpetuates a myth that big banks ripped off the American people through TARP bailouts and are primary responsible for the Great Recession.

That simply is not true.

Government Sponsored Enterprises(GSEs) – Fannie Mae and Freddie Mac – are the main culprits.

How Much Did TARP Big Bank Bailouts Cost?

For as much as some deplore big government, the great thing about the United States’ government is that it provides ordinary citizens detailed data on how it wastes taxpayer dollars.

The U.S. Treasury provides a daily… yes… a daily TARP update summarizing the current status of TARP! The big bank bailouts are listed at the top as “Bank Support Programs” on the daily report.

As of 2/10/2012 the banks were paid out $250.46 billion in bailouts and have paid back $258.55 billion.

Yup… that’s right… taxpayers so far have made $8 billion in PROFITS from the big banks!

Should 400+ little banks ever pay back their TARP loans then taxpayers will see even more profits.

As of right now, though, every penny spent in bank bailouts has been paid back and we are profiting.

President Obama’s TARP Bailouts

According to Friday’s update, the President’s highly regarded GM and Chrysler TARP bailouts have cost $79.69 billion and taxpayers are still owed $40.46 billion.

Since both GM and Chrysler went bankrupt anyway after TARP bailouts, at least half of that will never be paid back.

Why is this considered acceptable? Why aren’t automakers held accountable?

Fannie and Freddie

Though they facilitated, the banks were not the root cause of the recession.

It was caused by home mortgage loans approved for far to many people who could not afford to pay for them. Government’s repeal of Glass-Steagall in 1999 set the stage for bank participation in the economic collapse.

Home mortgage values were driven into a financial bubble that burst after the number of loan defaults inevitably reached critical mass and the economy came tumbling down.

If the loans had not been approved then there would have been no Great Recession. They were approved and backed by loan giants Fannie and Freddie – two Government Sponsored Enterprises.

Fannie Mae and Freddie Mac approved those loans for these reasons:

  • Government policy directed them to increase U.S. home ownership up to 70%
  • Government policy required them to extend home ownership to low-income Americans
  • Pure greed by Fannie’s and Freddie’s corporate managers who personally profited

As of March 2011, according to CBO report “The Budgetary Cost of Fannie Mae and Freddie Mac“, they have permanently lost taxpayers $317 billion and the toll will go higher. That is not counting the $900 billion or so of toxic loan debt approved by Fannie and Freddie that the government was forced to buy up.

Why hasn’t the President and Congress taken any action whatsoever to curb or punish those company’s abuses?

Conclusions

Automakers have soaked taxpayers for $40.46 billion in TARP bailout loans. Fannie and Freddie have soaked taxpayers for $317+ billion. The GSEs alone have lost more than the entire banking system bailout! That money will never be paid back.

The big banks, on the other hand, paid off their TARP bailout loans and taxpayers are making a tidy profit off them.

Valid arguments can be made to fine big banks for past sins and regulate Wall Street to prevent the loan practices that made the Great Recession worse. They can and should be held accountable for the their part.

But don’t blame the banks for things they are not primarily responsible for and leave the major culprits unpunished.

Yet Congress is being asked by the President to levy a $61 billion fee on big banks to defray the cost of their TARP bailouts; but not the automakers and not Fannie and not Freddie.

What Congress should do is take the profit they are making from the big banks and put it toward paying down the cost of automaker’s bailouts, and then levy the fee to the automakers for the rest of what they owe. But that won’t happen. It makes to much sense.

Nor will the President or Congress take action against the biggest culprits of all – Fannie and Freddie – because they are government sponsored.

To do that would be bad politics. In the pursuit of election year votes… anything goes.

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Feb 12, 2012, in 2012 Elections, bailouts, Fannie Mae, Freddie Mac, GSE, news, Obama, Politics, TARP. Bookmark the permalink. Leave a comment.

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