Tuesday, January 12, 2010

Mismanaging Recovery

What if you bought a car. You borrowed the money because you were a little bit short that week. Maybe you didn't even need the money but the dealer told you he would only let you have the car if you borrowed the money even though you had the cash. You paid the loan back quickly so as not to be in debt or under the threat of the financer telling you how you could use your car. You were free and clear.

Now the money loaner is telling you that some neighbors are angry that you've succeeded and are once again putting money in your pocket. They are upset that you aren't under the control of the banker but actually able to make your own decisions. They want a fee imposed upon you for having taken the loan in the first place and now being successful. You obligation doesn't end when it is fulfilled by repayment. Does that sound like a deal for you?

Bank Fees to be Imposed for Success

The White House hopes the fee will soothe the public's anger at financial firms. Most big banks that received public funds have repaid the government, but the industry is seen by many as having survived thanks to taxpayer support, and is now enjoying a profit rebound as the economy struggles.


Who cares about the "public's anger"? What's wrong with profit? What business is it of the White House? Are those authorities of assuaging anger, controlling profit and stifling growth among the enumerated powers of our Constitution?

One option under consideration involves placing a fee on a bank's liabilities, a number that theoretically represents the amount of risk a bank takes on, according to officials familiar with the matter. That approach would also have the effect of tamping down banks' risky behavior, another administration goal. Another option would be to target bank profits, these people said.


So, if I read that correctly, it tells me that the government intends to charge you a fee for money you owe to someone else? Can anyone explain how that enhances economic recovery? Does targeting profits motivate success? Is this communism?

The fee would likely be designed to avoid hitting certain segments of the financial industry, such as community banks, many of which are still struggling. The administration is trying to structure the fee so that it can't be passed along to bank customers already struggling in the weak economy, but officials concede that's hard to do. In other areas, such as overdraft fees and credit cards, banks already are passing costs of new legislation on to their customers.


As a "community organizer" I am certain that the Bamster must know what the definition of a "community bank" is but I don't. It sounds to me like some sort of neighborhood cooperative or union-owned credit union. Do you suppose?

Do they really believe that somehow imposing a fee on a struggling industry is conducive to good business and economic recovery? Do they really think that this time the fee won't flow downhill to the consumer? It always does. There is no other way. If costs don't go up then the company fails. But you would have to be someone other than Barney Frank to understand that economic truism.

2 comments:

Anonymous said...

I understand your position and would usually support captiatalism and the free market. Just keep the government out of things like this,however in this particular situation these banks were using "free money" from the Fed and making huge profits with little to no risk. This did not take brilliance on the part of the traders. One year tax of 90% on bonuses over $40k works for me. Sorry Mr.Ed

MagiK said...

It's called a slippery slope Anon.

On top of that there is nothing wrong with profits, there is nothing really wrong with Wall Street...what caused the problem was idiot know nothings who have never run a business getting power in DC and forcing the banks to make loans to people who should not have gotten loans....and once those loans were made, it was a no brainer that banks would want to off load the risk, and they did that in an incredibly stupid way, but the original cause was government forcing insane practices.