IBD Editorials
The War On Banks
Posted 01/14/2010 06:50 PM ET
Financial Crisis: The White House wants to impose a stiff new tax on banks to punish them for their role in the financial meltdown. That’ll really get them lending again … won’t it? We have to admit we’re a little perplexed. The White House and Congress have complained over and over again about the banks’ “failure to lend” to get the economy moving. Yet they now want to impose massive new taxes on the industry through an Orwellian “Financial Crisis Responsibility Fee” — supposedly to recoup TARP bailout funds and rein in bank risk-taking.
“When you try to value the degree of benefit that they received from this exceptional government assistance … this is essentially the least they could do,” a senior White House official told the Washington Post. Such thinking defies reason. The fee would add $90 billion to banks’ taxes over the next decade. And as we’ve noted repeatedly, anything you tax, you get less of. Tax the banks, you’ll get less lending. Guaranteed. Consumers will pay the “bank” tax, not banks. Moreover, suggesting that banks aren’t “paying back” is simply false. The TARP program doled out nearly $250 billion to the banks, many of which were forced to take the money. Yet, as Treasury Secretary Tim Geithner noted recently, the government expects to earn a $20 billion profit from its TARP loans. Compare that with the government’s own mortgage companies, Fannie Mae and Freddie Mac, which, as of the third quarter, had a combined book value of negative $4.8 billion. Treasury has already injected $111 billion into Fannie and Freddie, giving it a real loss on a mark-to-market basis of $115.8 billion.
Nevertheless, Congress recently lifted the $200 billion caps on cash infusions to the two agencies. They are now entitled to unlimited funding to cover any level of continued losses. So who’s really losing money here? This is so destructive of our financial system that we can only think it must be intentional. Indeed, it’s been a long-held desire among those on the left to control the nation’s private financial system — to harness its massive amounts of capital as a funding source for their social-planning agenda.
To do that, they need a compliant banking sector — one that fears being pilloried for its admittedly bad behavior during the financial meltdown. That role is being played by the Financial Crisis Commission. This ad hoc group kicked off a year of hearings this week with a sideshow attack on bank executives — but not a word about Fannie and Freddie, the bankrupt government entities that caused the meltdown in the first place.
It gets worse. Also this week, the Justice Department announced that it would go after banks and mortgage lenders for “bias in lending.” Yet this is the very thing that led to the debacle that brought our financial system to its knees. In his latest book, “Architects of Ruin,” Peter Schweizer argues plausibly that all of this is part of a long-term campaign to give extreme-left “community activists” control of our banks. Starting in the 1960s, and spearheaded in Chicago by far-left “organizer” Saul Alinsky, it has worked like a charm. Today our banks seem terrified of being publicly mau-maued for supposed racial and class insensitivity. They dare not stand up for themselves.
As angry as Americans may be with the banks, they need to see these moves for what they are: An outrageous attempt to seize control of a private banking sector that needs profits to grow. If you cherish having a credit card, securing a home loan based on your ability to pay or getting money to start a small business, you will oppose this attack on banks with all your might.