On the Chutzpah meter, this one is off the charts. Meeting with Democrats yesterday for a little Q and A, Arkansas Senator Blanche Lincoln challenges the young President on his economic policies. Lincoln’s in trouble and this question is getting all the press, but it’s Obama’s answer that is the stunning sound bite. Read more
Are they friggin’ kidding me? Increasing taxes on large banks to recoup financial “losses” is not going to put one dime into your pocket. They want to sell it to you as putting the screws to big-bank and putting money back in your pocket, but President Obama and Vice President Biden are lying.
Did anyone notice the big drop (more than 3.5%) in the stock market as of Monday’s close? As the financial stocks seem to have been the hardest hit, the better question, however, is “why”? Well, it seems that this weekend, the latest administration news “leak” landed with a thud, causing an even louder thud on Wall Street.
Here’s the “plan”. Treasury is worried that some of the TARP banks will not pass Treasury’s “stress test”, and it knows that it can’t go back to Congress for more TARP money. So, it is proposing to swap the preferred shares of stock it now has in those banks for common shares. How will that help the banks, you ask? Well, it won’t.
They propose a preferred-for-common swap, which can conjure up an extra $100 billion in bank tangible common equity, a core measure of bank capital. Not that this really adds any new capital; it merely shifts the deck chairs on bank balance sheets. Why Treasury thinks anyone would find this reassuring is a mystery. The opposite is the more likely result…
But, to a Martian landing here today, without benefit of any history, it would look like the bank has an enormous amount of “common equity”…a key statistic in evaluating bank capital, and, presumably a piece of the “stress test”.
Why the concern? As explained quite clearly in the above quoted April 21 editorial from the Wall Street Journal, it looks like the first step (or perhaps, the second) in nationalizing banks. With each share of common stock comes a vote. The government, by means of those votes, would be able to select the bank’s Board of Directors, who, in turn, set the bank’s policies. As an example, loans to “Group A” (whether sound or not) will be granted, and loans to Group B (no matter how sound) will not be granted. Some banks, most notably, J.P Morgan Chase, have indicated that they will not participate in Geithner’s “toxic assets” buy out plan. With control of the common share vote, they will. Most banks are opposed (for good reason) to the bill allowing the Bankruptcy courts to reduce the principal amount of home loans for those in bankruptcy. With control of the common share vote, the opposition will disappear.
And, guess who gets to control the votes that come along with the government’s ownership of banks’ common stock? If you guessed Barney Frank, chairman of the House Financial Services Committee, and Chris Dodd, chairman of the Senate Banking Committee, go to the head of the class. No wonder Wall Street is concerned.
And, now you also know why, even though some financial institutions are ready, willing and able to repay the TARP “loans” the Obama administration has said “no”.
Perhaps of greater concern to Wall Street is what happens when the government tires of playing with banks, and decides to dump millions of shares of bank common stock on the market? The “thuds” just keep getting louder.
This is about when I would start looking for the lifeboats. Joe “F off” Biden tells CNN in one of the longest most excruciating answers to a simple question I have ever heard, says no, Obama does not intend to fire CEOs at the banks. This coming on the heals of Tres Secretary Geithner telling Bob Scheiffer “We will fire you.” Damn no wonder Wall Street can’t decided which way to go.
Hmmm. Now that I have listened to it, sounds like there’s some wiggle room there. Oh and here’s the Geithner bite. Also long an excruciating.
What this comes down to is this. Wall Street will continue founder, and Business will continue to freeze employment until it gets a clear message from this administration on a direction. And it does not look like they are capable of a straight story.
Just in case you were wondering if the CEO of General Motors is the only one facing the guillotine (figuratively of course). Read more
Although it is doubtful that anyone in the room had the courage to ask that question, it would appear that had they, the answer would have been, “yes”. The story is beginning to emerge from the recent meeting between Obama, and the CEO’s of the banks receiving TARP money. Initially described by all as “cordial”, we now are learning that a more apt description might have been “frosty“.
But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”
“My administration,” the president added, “is the only thing between you and the pitchforks.”
Is that the part where the administration stirs the public into a frenzy, and ACORN rents buses for the now frenzied masses to pay a “visit” to the CEO’s homes, a la AIG? Whether you were in favor of TARP or not, it is unconscionable to think that unless the banks do what the administration orders, the CEO’s will be exposing themselves and their families to mob violence.
But, this is how far we have come in only a few short months. The government now controls our banking system. To be sure, the government has always regulated the banking system, but the banks themselves have been controlled by their shareholders, and the free market system. No longer.
Well, you say, let them pay back the TARP money and the government won’t control them anymore. Besides, wouldn’t it be great for the taxpayers to have that money back? Not so fast…
In a column in the April 4, 2009 Wall Street Journal, Stuart Varney (often a guest on Sound Off Connecticut) gives us the details of an even more chilling plan.
It is not for nothing that rage has been turned on those wicked financiers. The banks are at the core of the administration’s thrust: By managing the money, government can steer the whole economy even more firmly down the left fork in the road.
And here is how that is accomplished. All the government needs to do is refuse to accept a return of TARP money, and, believe it or not, that has already happened. According to that column, one bank (whose identity has not been revealed to prevent “retaliation”) has already offered to repay the TARP money, with interest, but the administration has said, “no”, threatening the bank with “adverse consequences” if the bank continues to try to repay the money!
Pitchforks, retaliation, adverse consequences? This is beginning to sound like what we have come to refer to as “Illinois political thuggery” at its finest. Only this time the stakes are much higher. What better way to redistribute wealth, than to control our systems of wealth. Should Congress pass the bill giving the Secretary of the Treasury the power to set the salaries of TARP recipients bright young financiers will leave, only to be replaced by government bureaucrats.