Ever see one of those old cartoons, where there is a character trying to hold back water from coming through a wall? The character plugs up one hole and then sits and relaxes, "Whew". A few seconds later, water pops through another hole. Then another. Now there are two holes with gushing water. The character scrambles to plug both of the holes. Then three more pop out. The character uses his toe for one, and tongue for another. Then four. You get the point.What is happening today is a clear illustration of what happens when politicians try to direct the economy via bailouts, taxes and regulations. The secondary effects are far worse than the effects would be have been had the economy been allowed to correct itself.
Obama's bailout of Wall St. banks didn't yield the results that he wanted. Bankers didn't act, ‘less greedy' (as if politicians are not ‘greedy'), they acted rationally. Now he needs to chastise them with name calling (‘Fat Cat Bankers') and find an adversary to blame his economic woes on.
"WASHINGTON (AP) -- Mindful of soaring deficits and an anti-Wall Street mood, President Barack Obama wants a new 10-year tax on the country's largest banks to cover a projected $117 billion shortfall in the government's financial crisis bailout fund."
Most who either paid back their money or didn't borrow any in the first place.
"A senior administration official said the tax, which officials are calling a "financial crisis responsibility fee," would apply only to financial companies with assets of more than $50 billion. Those firms -- estimated to amount to about 50 institutions -- would have to pay the fee even though many did not accept any taxpayer assistance and most others already paid back their government infusions."
People do argue, "The Wall St. banks were too large to fail. Had then been allowed to fail, the results would have been catastrophic." I don't disagree. It is a reasonable argument to consider that private institutions should not be allowed to get so large as to where their failure would severely damage the health of the financial system. One question that one should ask is - how have they been able to get so large and powerful and make so much money? Wall St. bankers, unfortunately do not operate within a ‘free' market. Quite the contrary. They are well entrenched in the political system. Where there is so much profit, and so little competition (Wall St.), you can bet your bottom dollar that they have been able to do it by lobbying for regulations that appear to benefit markets, but in practice, restrict competition. Here is an article from March, 2008 which shows Wall St. campaign contributions during the presidential election.
"WASHINGTON - "For now, though, Sen. Clinton of New York is leading the way, bringing in at least $6.29 million from the securities and investment industry, compared with $6.03 million for Sen. Obama of Illinois and $2.59 million for McCain, according to the Center for Responsive Politics. Those figures include donations from the investment companies' employees and political action committees."
Next up: More chastising of banks for ‘Not lending enough'. Stay tuned.
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