CBO says taxpayers on the hook for Financial Bail Outs Forever While President lies to Wall Street and Public
Posted April 26, 2010on:
There is a big hullabaloo about immigration now that Arizonans have finally taken the protection of their borders and the illegal alien problem into their own hands since the federal government is doing nothing to protect the public. But don’t let this detract you from the “other hand”. Senate Majority Leader Reid is pushing for a fast vote on the Finance Reform Bill which is another Bail Out forever more package for Wall Street! So people get on the phones and the emails and let Congress know how you feel about this. Otherwise you the tax payer will be taking the hit every time Wall Street bankers make a bad investment but you will NEVER share in any profits. BB
From The Heritage Foundation today:
Now the President is bringing the same audacity to the financial regulatory debate, telling a handpicked audience at New York’s Cooper Union: “Now, there is a legitimate debate taking place about how best to ensure taxpayers are held harmless in this process. But what is not legitimate is to suggest that we’re enabling or encouraging future taxpayer bailouts, as some have claimed. That may make for a good sound bite, but it’s not factually accurate.” (Obama tells another lie! BB)
Before President Obama continues to go around accusing others of lacking legitimacy, he should read the official cost estimate of the financial regulation bill released by the Congressional Budget Office last Thursday. Assessing the budgetary impact of the $50 billion that “systemically important financial firms” would have to pay in assessments to pay for the bill’s “Orderly Resolution Fund,” the CBO writes:
The total amount collected from assessments is estimated to be about $58 billion through 2020. But such assessments would become an additional business expense for companies required to pay them. Those additional expenses would result in decreases in taxable income somewhere in the economy, which would produce a loss of government revenue from income and payroll taxes that would partially offset the revenue collected from the assessment itself.
In other words, these financial firms have to get that $58 billion dollars from somewhere, and that somewhere is you. Now the Obama administration may argue that they actually oppose the creation of the resolution fund. But American taxpayers should be even more frightened when they find out why the Obama administration opposes it New York T. Thimes reports: “The Obama administration does not support the $50 billion fund, partly out of concern that more money may be needed if one or more big financial firms ever collapse and that creating a fund could make it difficult to authorize more money.” (The fund would restrict the thieves to just putting their hands in the one cookie jar! So sad. BB) AEI’s Peter Wallison details CBO how this provision could put taxpayer on the hook for much larger sums:
If the Dodd-Obama resolution plan is ever actually put to use, the direct or indirect costs could be many times greater. For example, the bill authorizes the Federal Deposit Insurance Corporation to borrow from the Treasury “up to 90 percent of the fair value of assets” of any company the FDIC is resolving. Yet one institution alone—Citigroup—has assets currently valued at about $1.8 trillion. The potential costs of resolving it (not to mention others) would be spectacularly higher than $50 billion. In short, the $50 billion in the resolution fund is a political number—a fraction of what the FDIC is authorized to borrow and spend.
Why would this vast sum be necessary? The Dodd bill has one answer. It says that the FDIC “may make additional payments,” over and above what a claimant might be entitled to in bankruptcy, if these payments are necessary “to minimize losses” to the FDIC “from the orderly liquidation” of the failing firm.
In other words, the agency would be able to borrow huge sums so that it could make more generous payments to creditors than they would receive in a bankruptcy. Generous payments to creditors would certainly make unwinding a firm “orderly”—but it would also encourage lending to the too-big-to-fail financial institutions while disadvantaging smaller, less favored institutions. This in itself will have a profound and destructive effect on competition.
This is the core problem of the Dodd-Obama Wall Street Bailout Bill: it gives the same regulators that missed the beginning of the last crisis the authority to engineer the exact same politically motivated bailouts (see General Motors, Chrsyler) for the next one.
There is a better way. Congress should modernize bankruptcy laws to create an expedited method to restructure and close large and complex financial firms. Such an approach would not give regulators virtually unlimited powers and would free the process from political interference by giving control to an unbiased court system that already has extensive experience with complex modern firms.
Please remember what I said in my last post: This is just the first step towards turning the financial industry of our nation over to the INTERNATIONAL financiers. Global government! BB
- Morning Bell: Wall Street Bailouts Forever
- Morning Bell: Dodd Bill Creates Permanent TARP and You Can Quote That
- Morning Bell: The Fatal Flaws of the Wall Street Bailout Bill
- 50% More Bureaucrats = Government “Cost Savings” for Financial Derivatives Reform
- Morning Bell: Economic Freedom Will Save the Earth
Goldman Sachs Money for Obama Wins at Monopoly: Kevin Hassett
April 26 (Bloomberg) — The financial overhaul bill creeping toward law is more than a thousand pages, but it has a simple story line. President Barack Obama and the Democrats have decided to turn Goldman Sachs Group Inc. and a few other financial giants into organizations that resemble AT&T Corp. in the 1950s.
Government rules will establish quasi-monopolies, and discourage competition. In exchange, the affected firms will be exposed to constant bureaucratic meddling, but will have the ability to manage this by influencing political appointments.