Why Do We Have A President Who Wants to Punish Successful Businesses?

I can't figure out why the president is threatening to tax banks who award their employees with bonuses?

The "financial crisis responsibility fee" would target major institutions. It would be levied on those that were the main contributors to the financial crisis and the most significant beneficiaries of the extraordinary actions taken by the Federal Reserve and the Treasury Department.

"My commitment is to recover every single dime the American people are owed," Obama said. "We want our money back and we're going to get it."

Obama noted that Treasury has already recovered the majority of the funds provided to banks, but said that wasn't good enough.

"If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers," Obama said.

This is on of the largest problems with this administration. How are investers supposed to determine where to put money if Obama can single out companies and inflict damage (effect their profits)? Does anyone think this is a good idea?

It is easy to guess which companies are not going to be punished. Note: it has little to do with how much money they borrowed.

Firms subject to the fee would have to have more than $50 billion in assets and must be a bank holding company, a thrift holding company, an insurer or a broker-dealer. Smaller firms and community banks would not be affected, the official said.

The fee would be assessed on an institution's liabilities minus its domestic deposits and core capital, which is the firm's cushion against possible losses. It's designed to tax firms with the greatest leverage, which is a proxy for how much risk the firm is taking in the markets.

The fee would be approximately 0.15% of a firm's covered liabilities. So, for example, a firm with $1 trillion in assets minus $100 billion in core capital and $500 billion in deposits, would leave it with $400 billion in covered liabilities. Consequently the firm would be charged approximately $600 million for the fee. (0.15% x $400 billion).

The administration estimates that roughly 50 companies will have to pay the fee, of which 20 to 27 would be banking institutions, according to the official. Roughly 35 would be U.S. companies and the rest would be the U.S. subsidiaries of foreign companies.

Some major beneficiaries of the financial bailout will not be subject to the fee - namely, mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and automakers GM and Chrysler.

In those cases, the administration didn't think the fee would be workable both because of the structure of those companies' assets and because of their current condition, the senior administration official said.

So, Fannie Mae, Freddie Mac, GM and Chrysler are not going to have to pay any fee. This is strange if you ask me. Let's go through the logic for a minute.

The TARP fund was designed to prop up large banks and holding companies which were effected by large losses. The TARP funds were there to allow these companies to loan and earn money again. Now that these compainies have become profitable again (the entire point of the TARP) Obama wants to punish them by asking them to pay back the TARP funds early?

The administration official said Obama wanted to accelerate a requirement in the existing TARP law that requires the president to seek a way to recoup unrecovered money in 2013, five years after the law was enacted.

"Look, the financial institutions collectively, particularly the larger ones, caused problems by their errors - their errors of judgment, their irresponsibility, in some cases their skating around dishonesty," said House Financial Services Committee Chairman Barney Frank, D-Mass.

"I think it is entirely reasonable to say that the industry that, A, caused these problems more than any other and, B, benefited from the activity, should be contributing," he said.

So far, the Treasury has given $247 billion to more than 700 banks. Of that, $162 billion has been repaid and banks have paid an additional $11 billion in interest and dividends.

700 banks borrowed 247 billion and paid back 173 billion. So, 247 - 173 = 74. So, the banks owe the Fed 74 billion.

Obama wants the money back early, and Barney Frank says that large financial institutions should pay it back, because they are morally obligated.

Barney forgot what he himself said:

2005:

Congressmen Barney Frank(D-MA), Now chairmen of the house financial services committee:

"...The more people exaggerate, in my judgment, the threat of safety and soundness. The more people conjure up the possibility of serious financial losses to the treasury - which I do not see - I think we see entities that are fundamentally sound financially, and withstand some of the disaster scenarios. And even if there were a problem the federal government doesn't bail them out. But the more pressure there is there - then the less I think we see in terms of affordable housing.

I don't understand. Fannie and Freddie borrowed much more than any of the private institutions, why are they not on the line?

The Office of Management and Budget released a report yesterday on the budgets and proposed overhauls of Fannie Mae and Freddie Mac that included the possibility of liquidating their assets. But don't get your hopes up.

The two government run mortgage finance companies have been scandalously costly for tax-payers, costing Americans far more in bailout money than they ever saved in cheaper mortgages. The OMB says that the two companies will need at least $92.2 billion more in fiscal 2010. This is on top of the $78.2 billion in aid they've received since they were taken over by the government in September.

The entire point of having Fannie and Freddie operate as government sponsored entities was that they could borrow at lower rates than purely private companies. This savings enabled them to make mortgage loans at lower rates, and allowed them to buy up or guarantee mortgages from private lenders at rates that would otherwise have been uneconomical. Over the years, Fannie and Freddie may have saved Americans as much as $100 billion in mortgage payments. Now the OMB says they'll need that much just to get through next year.

So, 700 banks owe the Fed 74 billion and Obama is jumping up and down because they made profits.

Meanwhile Fannie and Freddie are going to need 92.2 billion THIS YEAR! Where is the outrage? You have banks paying back what they have borrowed, but Fannie and Freddie get a free pass along with GM and Chrysler and they can ask for more money! Let's spread the wealth around...

Any Obama buyer's remorse yet?

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