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Published on Friday, January 15, 2010 by CommonDreams.org
Obama’s Latest Ruse: The Bank Tax
When president Obama was awarded Advertising Age's 2009 Marketer of the Year award, we were alerted to expect carefully crafted public relations posturing in defense of the reputation of Brand Obama. We have not been disappointed. The president has regularly taken verbal pot shots at the financial oligarchy in an effort to convey the impression that he shares the public's outrage at the behavior of the plutocrats. But he has thrown no sticks and stones at the banksters, who know as well as you and I that mere words can never hurt them.
None of Obama's faux outrage has been as disingenuous as his Wednesday announcement that he will finally respond sympathetically to the public's deep resentment of the administration's tolerance -and therefore encouragement- of the bad guys' looting of the public treasury.
Obama assured his constituents that he would "recoup every last penny for American taxpayers" by taking back, in the form of taxes on the banks, the wealth that households have been forced to transfer to the coffers of the instigators of the financial crisis.
The announcement was timed to offset what will surely be another surge of public anger at the expected announcement this week of the banks' year-end bonus payments.
The proposed taxes would apply to financial institutions with more than $50 billion in assets and would extract about $90 billion from them over ten years. Obama's central claim is that this would cover all losses incurred by the government under the Troubled Asset Relief Program (TARP). We are supposed to be relieved that households will in the end be repaid all that has been transferred from them by TARP. "We want our money back, and we're going to get it," said Obama.
Obama is perpetrating a ruse. The tax-the-banks proposal rests on conspicuously false empirical assumptions and very bad math.
A key premise of the tax proposal is that TARP is the government's sole gift to the financial elite. This is of course false: TARP is in fact a relatively small fraction of the State's total rescue effort. Financial institutions have also been treated to no-cost and virtually unlimited access to credit, broad guarantees against losses and lax regulation, to mention only the most conspicuous gifts. Even if TARP did represent the administration's total commitment to financial institutions, Obama's claim would still be nonsense. TARP handed $700 billion to the banks. How does $90 billion "recoup every last penny" of $700 billion? The president thinks, with good reason so far, that he can get away with anything. Anything. Hence the counterfactual premise and the slapstick math.
That's not the worst of it. Neil Barofsky, the Special Inspector General charged with overseeing the bailout plan, reports that the bailout could end up costing $23.7 trillion. Critics of Barofsky accuse him of exaggeration. Let's suppose they are right. Say Barofsky doubled the true cost of the government's commitment. So what? Bloomberg reports, with no challengers, that the cumulative commitment to financial rescue initiatives amount so far to more than $8.5 trillion. $90 billion is a small drop in a big bucket.
How do these figures compare to what working people have lost? Households have so far lost $12 trillion in wealth in the wake of the crisis. By the end of the third quarter of 2008, shortly after the announcement of an impending collapse of the entire financial system, households had already lost $647 billion in real estate, $922 billion in stocks, $523 billion in mutual funds and $653 billion in life insurance and pension funds reserves. Total destruction of household wealth in Q3 2008 came to $2.8 trillion, the worst decline on record. That comes to four times TARP's $700 billion. If "[w]e want our money back," we're dead out of luck. Obama knows this, but the man is an instrument of his financial masters, and the ad campaign functioning to obscure this reality requires deception. The president appears willing to oblige.
None of Obama's faux outrage has been as disingenuous as his Wednesday announcement that he will finally respond sympathetically to the public's deep resentment of the administration's tolerance -and therefore encouragement- of the bad guys' looting of the public treasury.
Obama assured his constituents that he would "recoup every last penny for American taxpayers" by taking back, in the form of taxes on the banks, the wealth that households have been forced to transfer to the coffers of the instigators of the financial crisis.
The announcement was timed to offset what will surely be another surge of public anger at the expected announcement this week of the banks' year-end bonus payments.
The proposed taxes would apply to financial institutions with more than $50 billion in assets and would extract about $90 billion from them over ten years. Obama's central claim is that this would cover all losses incurred by the government under the Troubled Asset Relief Program (TARP). We are supposed to be relieved that households will in the end be repaid all that has been transferred from them by TARP. "We want our money back, and we're going to get it," said Obama.
Obama is perpetrating a ruse. The tax-the-banks proposal rests on conspicuously false empirical assumptions and very bad math.
A key premise of the tax proposal is that TARP is the government's sole gift to the financial elite. This is of course false: TARP is in fact a relatively small fraction of the State's total rescue effort. Financial institutions have also been treated to no-cost and virtually unlimited access to credit, broad guarantees against losses and lax regulation, to mention only the most conspicuous gifts. Even if TARP did represent the administration's total commitment to financial institutions, Obama's claim would still be nonsense. TARP handed $700 billion to the banks. How does $90 billion "recoup every last penny" of $700 billion? The president thinks, with good reason so far, that he can get away with anything. Anything. Hence the counterfactual premise and the slapstick math.
That's not the worst of it. Neil Barofsky, the Special Inspector General charged with overseeing the bailout plan, reports that the bailout could end up costing $23.7 trillion. Critics of Barofsky accuse him of exaggeration. Let's suppose they are right. Say Barofsky doubled the true cost of the government's commitment. So what? Bloomberg reports, with no challengers, that the cumulative commitment to financial rescue initiatives amount so far to more than $8.5 trillion. $90 billion is a small drop in a big bucket.
How do these figures compare to what working people have lost? Households have so far lost $12 trillion in wealth in the wake of the crisis. By the end of the third quarter of 2008, shortly after the announcement of an impending collapse of the entire financial system, households had already lost $647 billion in real estate, $922 billion in stocks, $523 billion in mutual funds and $653 billion in life insurance and pension funds reserves. Total destruction of household wealth in Q3 2008 came to $2.8 trillion, the worst decline on record. That comes to four times TARP's $700 billion. If "[w]e want our money back," we're dead out of luck. Obama knows this, but the man is an instrument of his financial masters, and the ad campaign functioning to obscure this reality requires deception. The president appears willing to oblige.
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35 Comments so far
Show AllObama is a paid actor in a tragic play.
Obama could be pulling down $4 million per movie in Hollywood.
Why is he messing with a $400,000 salary as president?
Because the REAL money comes after he leaves the White House. Slick Willy has made a fortune out of office.
Power. Pure and simple.
Funny how the rest of the planet's households only lost a fraction of that, and now have mostly recouped it all.
Do the bankers, corporatists and corrupt politicians see Americans as the best marks? Or is this vulnerability of the people just intrinsic in the American system?
Is the prototypical American "Rugged Individualism" just a euphemism for culling the herd one at a time for fleecing??
The term bankers only refers to heads of very small locally run banks. Heads of large banks are now officially referred to as "Banksters".
I suspect the rugged individualism myth is pushed to keep people isolated, keep them from coming together against the powers that be.
The other one I love is pulling yourself by your own bootstraps, individual responsibility. If you fail it is all your fault. The ruling class has nothing to do with it. The fact that they have shipped millions of jobs overseas, charge you outrageous fees for health care, require you to save for your retirement in the Casino called Wall Street has nothing to do with you failing. If you can't get a job it is all your fault. If you go bankrupt because your health insurance sucks or you cant afford it, its all your fault. If the stock market tanks and you loose your retirement its all your fault.
This just allows the elites to get away with murder, because no matter what they do to make your life more difficult, in the end if you fail its all your fault and no matter what they do, never theirs. It amazes me that folks, especially on the right just lap this stuff up. Oh well...
you "suspect?"
I was always convinced that this MYTH about "american rugged individualism" ...is a code word - for dismantling every single public PROTECTION for the individual against CORPORATE assault.
that's the true purpose of "american rugged individualism" --
be "on your own" so that americans resent the very laws or institutions that are supposed to protect THEM FROM PRIVATE corporate power and these are then destroyed..and they are rendered completely defenseless.
I have always been convinced that this is the core of the "american way" -- it is actually classic:
"DIVIDE and CONQUER".
reduced to its "rugged individual".
a worker goes inside the work-place - they OWN YOU. you step outside - they STILL OWN you..and your life is wrapped aroound "work"..everywhere you go - it's the power of the PRIVATE corporation OVER the public commonwealth...
by MEANS of "empowering the rugged american individual"....
for nothing , really, than to GIVE UP YOUR RIGHTS and very individuality TO
the PRIVATE CORPORATION with whom and for whom the GOVERNMENT really works -- NOT for the commonwealth.
Who knew that the phrase, "putting lipstick on a pig" would have legs?
Had this been known, the phrase would have been "putting pantyhose on a pig".
· Yr Obd't Servant
If you can fool enough of the people enough of the time....
As correct as Mr. Nasser is he left out the money being paid back by Banksters.
Dean Baker informs and warns that Freddy and Fanny have recently been granted UNLIMITED access to treasury funds and he fears these funds will be used to buy unlimited amounts of toxic derivatives.
The banksters are using the interest free no strings attached money they get from the Fed to pay back the TARP money that has token strings attached to it.
Can you say SHELL GAME ?
I had a mortgage with Bank of Amerika. I was recently notified that it was 'transfered to' Freddie Mack. Smell a rat? So do I! And a big one at that.
Let's not forget that businesses usually try to pass taxes on to their customers through increased fees. So it is the bank's customers and not the executives and shareholders who will end up paying most or all of whatever amount is actually recovered.
See where other fascist countries failed this one will not. Other countries had the strong figure head that showed their rules with their iron fist, like where Hitler told the corperations what do to. See now in this America we have today the figurehead is but a puppet. Told what to do by his advisers whom most all have all worked in high spots of the corperate sector. It really matters not who we elect. And the only real change we could possibly gain is the none of the above vote. One party rules this country and that is the fascist corperate oligarchy.
You're absolutely right. By changing the collar, not the dog, Amerikans are duped into believing that they're in charge and have choices.
like aphids in an ant colony being stroked to secrete nectar. But the assholes cut down the tree that sustained the aphids.
Brilliant! I'll have another round please.
Obama has lied and deceived the people since he was elected. We can now see that all those high-minded campaign promises were just lies--he never had any intention of taking the side of the people. This is the biggest scam of the century. By comparison, G.W. was small potatoes. Obama the con man should never be re-elected. I'd rather have a republican who will tell you to your face that he loves the corporations and won't vote for health care, than a president who publicly decries big industry, promises transparancy and a public option, and then instructs his gofers to give the insurance companies everything they want. Obama can take his fancy rhetoric and shove it.
Yes, to win the marketer of the year award you need to be able to sell yesterday's newspaper for twice the price today's newspaper is selling for. Obama clearly deserves the award based on his ability to be a serial sell out and still be able to maintain favorable approval ratings.
I beg to differ. The deception took place BEFORE he was elected. Once in office, he has done exactly what he was expected to do.
Great report by Alan Nasser!
Dylan Ratigan described the full extent of taxpayer exposure yesterday (Thursday the 15th) on his MSNBC show, and discussed this issue in some depth with Elizabeth Warren.
Worth a look if anyone hasn't seen it.
http://www.msnbc.msn.com/id/31510813/
This article cheapens the debate and makes progressives look silly. I want to overhaul the system myself but posting weak arguments is not going to appeal to anyone. Yeah TARP was supposed to give out $700 Billion but not all of it was given out and much has been paid back, so saying we just handed over $700 billion is deceptive. Also, he whines about the trillions in assets households have lost lately. Think about it, where did they get those assets in the first place? The bubble! I'm not disagreeing that something significant needs to be done but we need more honest arguments. I am frankly surprised this is from a professor of political economy.
No, this article shows how cheap (neo)liberalisms ideology is. We have a Dem in office who uses liberal rhetoric to "prove" that he cares about the working-poor and middle-class, but the whole time is swindling us out of everything that so many people worked so hard for. This is a fool's tragedy on a massive scale.
note: For full disclosure, I am a former student of Nasser's. It's possible that I have a different view of this article because I am able to place it in context of his teachings.
"Yeah TARP was supposed to give out $700 Billion but not all of it was given out and much has been paid back, so saying we just handed over $700 billion is deceptive."
-----------
Wanna bet on that one? And, btw, who's figures are you using here? The banks' or the White House's? Or both?
The author is quite correct. Read this:
http://www.bloomberg.com/apps/news?pid=20601087&sid=armOzfkwtCA4&refer=home
"Obama's central claim is that . . . "
Throw in anything you want here:
"Hope."
"Change you can believe in."
No, forget about those. Try this:
"Apres moi le deluge." Obama now speaks French exclusively at his press conferences. All MSM White House reporters must learn the language or bring a translator with them. Obama wears a monocle and smokes rose colored cigarettes in a crimson colored ivory cigarette holder that matches his silk clothing and jewel bedecked shoes. He audibly sniffs at every question. He is thinking of having cosmetic surgery to reduce the size of his ears.
He is having the White House remodeled along the lines of the Palace at Versailles...
Please! I think I would actually warm up to Obama, if only infinitesimally, if he morphed stylistically into an amalgamation of the Sun King, the late Michael Jackson, and Mr. Peanut.
· Yr Obd't Servant
Economists are infallible like the Pope.
Great piece by Alan Nasser ...
Indeed we have more bait and switch by Obama ... The actual losses to the tax payer are in the trillions and there are more to come ...
The banks have still not come clean about the vast majority of their losses ... but they are off-loading them as fast as they can into the Fed, Fannie, Freddie and other government guaranteed entities.
We are not yet half way through the mortgage crisis and the Commercial RE crisis is just beginning. The biggest lie is that the crisis is over ...
Just like Iraq: Only takes Bush half a year to go in; Obama takes OVER three times as long to get HALFWAY out (50K dupes are NEVER leaving!). "FDR" 100 days? Franklin wants 1000! Bail the Bernanksters in a less than year; but Unka 'Bomb's giving DEM 10 years to pay the "loan" back, Without INTEREST?!! I SAY, FORECLOSE on the Wall Street-walkers NOW!!!
Until the late 1970's many of the largest industries in the United States were heavily regulated i.e. banking, trucking, airlines, telecoms, etc. etc.. Why? Because back in the beginning of the 20th century the United States was caught up in a period of unregulated free market capitalism which led to a few wealthy people becoming extremely wealthy and everybody else not so. Eventually this period of unregulated free market capitalism led to the Republican Great Depression of 1929. Does all of this sound familiar? Of course all the so called experts that brought us to this sorry state are now telling us that reregulating business is not the answer to our problems. No, we need to give billionaires more tax cuts and we need to remove the remaining regulations on business. (Question? Why do all these rats still have jobs?)
Of course after wacthing the way the American people have behaved over the last thirty years it scares the hell out of me to think which way they will choose to handle this situation!
History repeats itself, time and again and USans suffer a terminal case of historic amnesia
Obama is soooooo good to us. I just can't stand it...
Seriously, if he's pushing for this, there's a huge sell out here. Of course, I know for a fact that if it ever happens (big IF), all the banksters will do is pass it down to us in higher interest rates, fees, etc. However, something tells me that this is a cover up for something bigger, much, much bigger.
I hope I'm wrong but when it comes to the politics of the US, I'm sorry to see, I haven't been wrong yet. Not once!
The bailout is in the 10's of trillions:
http://www.bloomberg.com/apps/news?pid=20601087&sid=armOzfkwtCA4&refer=home
The fact is our entire debt-based neo-liberal economic system itself is a ponzi scheme and has been since 1913. It only works if debt is continually expanded, made possible by the so called innovations of derivatives and securitization which allows our private debts to be sold to foreigners. When people could no longer service their debts starting with highest risk subprime borrowers, the system started to collapse.
Since 1960 and accelerated in 1980, "private" debt including financial debt has increased virtually every year from 40% of GDP in 1960 to 300% now at $47 trillion. Without ever increasing debt, there would have been virtually no growth in GDP or employment. The only way to keep the system going is by inflating asset prices like housing and stocks and fancy ways to increase debt (hello derivatives).
The flaw is the concept of making money with money using compounding interest. Allows rich people to sit back and watch their money magically grow but this only happens because of ever increasing indebtedness from the bottom 80 to 90% of people and speculative inflation of asset prices. Since compound interest grows exponentially, but economies do not, it is a mathematical certainty at some point the jig will be up.