How many more months must Americans endure near-double-digit unemployment, little or no new-job creation, economic stagnation, a topsy-turvy stock market, and sagging consumer confidence before Washington politicians concede the "summer of recovery" is mostly a mirage?
They've spent nearly $8 trillion since 2007, including nearly $2 trillion on economic stimulus programs and an equal amount for the Troubled Asset Relief Program and similar bailouts. They've effectively nationalized Fortune 500 corporations, taken over the health care sector, and set the regulatory stage for more bailouts and takeovers, but the needle is still stuck. Worse, recovery isn't likely for many months ahead because those same politicians are planning more of the same failing policies.
Consider that entrepreneurial small businesses are the job-creation machine of a free-enterprise economy. But these firms are about to get smacked with significant tax rate increases that will keep most of them struggling just to survive. President Obama, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi will let the Bush tax cuts of 2001 and 2003 expire as scheduled Jan. 1, 2011. The current 33 percent tax rate on individuals will go to 36 percent, and the current 35 percent rate will increase to 39.5 percent. Those are individual rates, but the majority of small-business profits are taxed as income to individuals.
According to Internal Revenue Service data,30 million tax returns reporting small-business income were filed in 2008, showing net business profits of $631 billion. Americans for Tax Reform pointed out Friday that "large chunk of this net profit -$457 billion - faced taxation in households making more than $200,000 per year. A majority of small business profits will face a tax rate hike under the Obama-Pelosi-Reid plan." So, those millions of small-businesses will soon have even less money to invest in expanding existing product lines or services, as well as job-creating new ventures.
As for the big corporations that are hoarding billions of dollars that would otherwise be flowing into new investments and fueling renewed economic growth, there is no mystery why they are putting off making such decisions. Who can blame them after seeing the nationalization of General Motors and Chrysler, or the moratoria under which hundreds of large and small energy firms were forced to stop drilling in the Gulf of Mexico and on land in places like Wyoming?
Also, an explosion of new anti-business regulations to further hobble the economy is coming soon, thanks to Obama-Reid-Pelosi policies. As ATR's Grover Norquist told The Examiner, "You don't know what the law will be next month, or if you will even be allowed to own your business. The only thing you can be sure of is they will raise your taxes. You would be a fool now to go out and hire somebody new."
Showing posts with label TARP. Show all posts
Showing posts with label TARP. Show all posts
Sunday, August 15, 2010
Friday, August 6, 2010
Obama hobbles corporate borrowing to foster reliance on bailouts and force firms to "come crawling to the government"
At the 1986 White House Conference on Small Business, President Ronald Reagan offered these famous remarks about politicians' views on business in the 1970s. Reagan said, "Back then, government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
Amazingly, in that speech nearly 25 years ago, Reagan also summed up perfectly the Obama administration's view of the economy in the present. On Thursday, President Obama announced that the government is providing a loan guarantee of $250 million to Ford Motor Co. from the Export-Import Bank. In making the announcement, at a Ford assembly plant in Chicago, Obama also defended billions of dollars in TARP bailouts to Ford rivals, General Motors and Chrysler, that he continued from the Bush administration.
Not mentioned by Obama, and not picked up in media coverage of the new $250 million loan, is a new regulatory measure signed into law by Obama just three weeks ago, which nearly stopped a $1 billion bond offering by Ford
Just days after Obama signed the Dodd-Frank so-called financial reform bill (here is my general overview for TAS of the Dodd-Frank monstrosity), Ford found that it couldn't issue a bond to allow it to finance more credit for its customers. The reason, as reported by AOL Daily Finance, is that Dodd-Frank "fixed" the problem of poorly researched credit ratings by designating the three big rating agencies as "experts" subject to the same liability as professionals such as auditors. Since the Securities and Exchange Commission requires that bond offerings have a credit rating, Ford's venture became a no-go.
The SEC fixed this problem temporarily by allowing Ford and other companies to issue bonds without rating for six months. But after that, according to experts quoted in the article, the trouble will resume unless there is a permanent fix to Dodd-Frank's "fixing" of the credit rating system.
It is not known if Ford's decision to take this government money -- after honorably refusing a TARP bailout when it was offered two years ago -- is related to expected regulatory troubles in the bond market.
But what is predictable is that the more frustrating the obstacles the government puts in front of businesses, the more some firms will come crawling to the government for bailouts -- and the more that firms will kowtow to the prevailing government's agenda and be politically connected, should they ever need this lifeline.
Amazingly, in that speech nearly 25 years ago, Reagan also summed up perfectly the Obama administration's view of the economy in the present. On Thursday, President Obama announced that the government is providing a loan guarantee of $250 million to Ford Motor Co. from the Export-Import Bank. In making the announcement, at a Ford assembly plant in Chicago, Obama also defended billions of dollars in TARP bailouts to Ford rivals, General Motors and Chrysler, that he continued from the Bush administration.
Not mentioned by Obama, and not picked up in media coverage of the new $250 million loan, is a new regulatory measure signed into law by Obama just three weeks ago, which nearly stopped a $1 billion bond offering by Ford
Just days after Obama signed the Dodd-Frank so-called financial reform bill (here is my general overview for TAS of the Dodd-Frank monstrosity), Ford found that it couldn't issue a bond to allow it to finance more credit for its customers. The reason, as reported by AOL Daily Finance, is that Dodd-Frank "fixed" the problem of poorly researched credit ratings by designating the three big rating agencies as "experts" subject to the same liability as professionals such as auditors. Since the Securities and Exchange Commission requires that bond offerings have a credit rating, Ford's venture became a no-go.
The SEC fixed this problem temporarily by allowing Ford and other companies to issue bonds without rating for six months. But after that, according to experts quoted in the article, the trouble will resume unless there is a permanent fix to Dodd-Frank's "fixing" of the credit rating system.
It is not known if Ford's decision to take this government money -- after honorably refusing a TARP bailout when it was offered two years ago -- is related to expected regulatory troubles in the bond market.
But what is predictable is that the more frustrating the obstacles the government puts in front of businesses, the more some firms will come crawling to the government for bailouts -- and the more that firms will kowtow to the prevailing government's agenda and be politically connected, should they ever need this lifeline.
Sunday, August 1, 2010
Are the Republicans ready to take power again? "Probably not..."
Is the Republican party ready to regain power? Probably not -- we have seen that how Republicans behave in the minority, especially under a Democratic president, is no predictor of how they will act in the majority. As steadfast as they have been against President Obama, relatively few Republicans who voted for the TARP bailout, the Medicare prescription drug benefit, or our exercise in Mesopotamian nation-building have repented.
Yet it is a risk conservatives have no choice but to take. Hamstrung Democrats can paradoxically be better at stifling government growth than liberated Republicans, but ineffectual Democratic majorities are like dams: the odds of anything getting through are small, but the result of any breach is catastrophic. The Blue Dogs' sense of self-preservation failed them on the stimulus and health care, both of which cry out for repeal, with cap and trade lurking not far behind.
The Democrats have now done things only Republicans can undo. The question is whether the GOP will be up to the task. They'll have to strike quickly and decisively. Most of the good the last Republican majority did was in 1995-96. By 1998, they were into earmarks and trying to out-spend Bill Clinton, with another flurry of small-ball conservative reforms during the first two years of George W. Bush.
The most important thing is to improve the quality of Republicans in Washington. So far this project has been a mixed bag. On the positive side, there is Pat Toomey over Arlen Specter, Marco Rubio over Charlie Crist, and Rand Paul over Trey Grayson. But Mark Kirk and Michael Castle will give Senate Republicans a slight nudge to the left. Things look better in the House, where there is more new blood.
Politically, Republicans are probably better off winning enough seats to effectively check Obama without giving him a Gingrich figure to demonize in 2012. The GOP excels at this role. Unfortunately, the country needs more than gridlock -- it needs Republicans to make serious in-roads in the opposite direction.
W. James Antle III is associate editor of The American Spectator
Yet it is a risk conservatives have no choice but to take. Hamstrung Democrats can paradoxically be better at stifling government growth than liberated Republicans, but ineffectual Democratic majorities are like dams: the odds of anything getting through are small, but the result of any breach is catastrophic. The Blue Dogs' sense of self-preservation failed them on the stimulus and health care, both of which cry out for repeal, with cap and trade lurking not far behind.
The Democrats have now done things only Republicans can undo. The question is whether the GOP will be up to the task. They'll have to strike quickly and decisively. Most of the good the last Republican majority did was in 1995-96. By 1998, they were into earmarks and trying to out-spend Bill Clinton, with another flurry of small-ball conservative reforms during the first two years of George W. Bush.
The most important thing is to improve the quality of Republicans in Washington. So far this project has been a mixed bag. On the positive side, there is Pat Toomey over Arlen Specter, Marco Rubio over Charlie Crist, and Rand Paul over Trey Grayson. But Mark Kirk and Michael Castle will give Senate Republicans a slight nudge to the left. Things look better in the House, where there is more new blood.
Politically, Republicans are probably better off winning enough seats to effectively check Obama without giving him a Gingrich figure to demonize in 2012. The GOP excels at this role. Unfortunately, the country needs more than gridlock -- it needs Republicans to make serious in-roads in the opposite direction.
W. James Antle III is associate editor of The American Spectator
Sunday, July 18, 2010
Fed bailout overseer faults order to close car dealerships
WASHINGTON — The Treasury Department failed to consider the economic fallout when it told General Motors and Chrysler to quickly shutter many dealerships as part of government-led bankruptcies, a federal watchdog found.
A report released Sunday by the special inspector general for the government's bailout program raised questions about whether the Obama administration's auto task force considered the job losses from the closings while pressuring the companies to reduce costs.
Treasury didn't show why the cuts were "either necessary for the sake of the companies' economic survival or prudent for the sake of the nation's economic recovery," said the audit by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, the $787 billion stimulus program known as TARP.
"Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses," investigators said.
Those decisions resulted in "potentially adding tens of thousands of workers to the already lengthy unemployment rolls — all based on a theory and without sufficient consideration of the decisions' broader economic impact," the report said.
A report released Sunday by the special inspector general for the government's bailout program raised questions about whether the Obama administration's auto task force considered the job losses from the closings while pressuring the companies to reduce costs.
Treasury didn't show why the cuts were "either necessary for the sake of the companies' economic survival or prudent for the sake of the nation's economic recovery," said the audit by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, the $787 billion stimulus program known as TARP.
"Treasury made a series of decisions that may have substantially contributed to the accelerated shuttering of thousands of small businesses," investigators said.
Those decisions resulted in "potentially adding tens of thousands of workers to the already lengthy unemployment rolls — all based on a theory and without sufficient consideration of the decisions' broader economic impact," the report said.
Friday, April 23, 2010
Through TARP, tax hikes, new taxes, public sector unions and Obamacare, Obama is seizing control
President Obama is setting a record for proclamations to alter the shape of American society. Every few weeks there is another edict, beginning after his victory with moving the Census from Commerce to the White House in order to jigger the figures to his political liking. Then came the TARP stimulus plan. As debt is repaid, the money is remaining in the hands of the White House rather than going to reduce the frightening public debt.
Then came the health care "overhaul"; climate change initiatives; the out-of-character call for offshore drilling; the announcement that we would increase troop strength in Afghanistan (but wiring the move for doom with a public withdrawal date); reductions in U.S. nuclear weapons capability; announcing the closing of Gitmo; the prosecution of CIA operatives whose only crime was to do their job; insulting our allies Great Britain and Israel; the move to try terrorist suspects in open court; and the presidential order to avoid identifying the enemy in the war on terrorism, a politically correct maneuver that smiles on the machinations of the radical scholars.
To fund his reordering of power in the midst of a steep economic downturn, Obama has signed into law 25 tax increases totaling $670 billion over the next ten years, according to a report issued by the House Ways and Means Committee. And Paul Volcker and Nancy Pelosi -- reacting to the reality that increased income taxes cannot save the country from going broke -- are pushing a Value Added Tax, the most pernicious of levies that will empower the IRS to enter places of business unannounced to demand records and enforce compliance.
Accompanying the crescendo of taxes, edicts, and thinly disguised manifestos is an undertow of societal tectonics that will rearrange the free-market system beyond our ability to salvage it. The steady advance of unionization in the public sector under Obama -- and the use of federal power to increase organized labor in the private sector -- is leading the U.S. to the edge of syndicalism, the takeover of capitalism by unions for the purpose of political control.
Then came the health care "overhaul"; climate change initiatives; the out-of-character call for offshore drilling; the announcement that we would increase troop strength in Afghanistan (but wiring the move for doom with a public withdrawal date); reductions in U.S. nuclear weapons capability; announcing the closing of Gitmo; the prosecution of CIA operatives whose only crime was to do their job; insulting our allies Great Britain and Israel; the move to try terrorist suspects in open court; and the presidential order to avoid identifying the enemy in the war on terrorism, a politically correct maneuver that smiles on the machinations of the radical scholars.
To fund his reordering of power in the midst of a steep economic downturn, Obama has signed into law 25 tax increases totaling $670 billion over the next ten years, according to a report issued by the House Ways and Means Committee. And Paul Volcker and Nancy Pelosi -- reacting to the reality that increased income taxes cannot save the country from going broke -- are pushing a Value Added Tax, the most pernicious of levies that will empower the IRS to enter places of business unannounced to demand records and enforce compliance.
Accompanying the crescendo of taxes, edicts, and thinly disguised manifestos is an undertow of societal tectonics that will rearrange the free-market system beyond our ability to salvage it. The steady advance of unionization in the public sector under Obama -- and the use of federal power to increase organized labor in the private sector -- is leading the U.S. to the edge of syndicalism, the takeover of capitalism by unions for the purpose of political control.
Tuesday, April 20, 2010
TARP bailouts mostly repaid, but Fannie's and Freddie's expected to grow to $381 billion
Now that nearly all the TARP funds used to bail out Wall Street banks have been repaid, the government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac stand out as the source of the greatest taxpayer losses.
The Congressional Budget Office has estimated that, in the wake of the housing bubble and the unprecedented deflation in housing values that resulted, the government's cost to bail out Fannie and Freddie will eventually reach $381 billion. That estimate may be too optimistic.
Last Christmas Eve, Treasury removed the $400 billion cap on what the government might be required to invest in these two GSEs in the future, and this may tell the real story about the cost to taxpayers. In typical Washington fashion, everyone has amnesia about how this disaster occurred.
The story is all too familiar. Politicians in positions of authority today had an opportunity to prevent this fiasco but did nothing. Now—in the name of the taxpayers—they want more power, but they have never been called to account for their earlier failings.
The Congressional Budget Office has estimated that, in the wake of the housing bubble and the unprecedented deflation in housing values that resulted, the government's cost to bail out Fannie and Freddie will eventually reach $381 billion. That estimate may be too optimistic.
Last Christmas Eve, Treasury removed the $400 billion cap on what the government might be required to invest in these two GSEs in the future, and this may tell the real story about the cost to taxpayers. In typical Washington fashion, everyone has amnesia about how this disaster occurred.
The story is all too familiar. Politicians in positions of authority today had an opportunity to prevent this fiasco but did nothing. Now—in the name of the taxpayers—they want more power, but they have never been called to account for their earlier failings.
Saturday, April 4, 2009
Does Obama want lasting control of banks
"I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn't much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street's black hole. So why no cheering as the cash comes back?
My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command.
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."
http://online.wsj.com/article/SB123879833094588163.html
My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command.
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."
http://online.wsj.com/article/SB123879833094588163.html
Thursday, February 5, 2009
Treasury overpaid for distressed assets
One of the finest illustrations I have seen of the difference between normal people and the politicians who infest Washington is an initial report on the Troubled Asset Relief Program.
As we know, normal people are delighted to run across distressed home owners. While feigning sorrow, we buy their houses for 80 cents on the dollar, and celebrate our good fortune. Sure, we feel sorry for the seller, but only for 10 seconds or so.
Politicians, who are not playing with their own money, apparently take a different view. Elizabeth Warren, chairwoman of the Congressional Oversight Panel, overseeing the TARP transactions, testified to the Senate Banking Committe on Thursday that the U.S. Treasury Department paid $254 billion for assets that were worth $176 billion at the time of the transactions in 2008.
Instead of underpaying for distressed assets, Treasury overpaid.
By my calculation, the sellers now owe the politicians $78 billion in campaign contributions, but I'm sure they'll settle for less.
As we know, normal people are delighted to run across distressed home owners. While feigning sorrow, we buy their houses for 80 cents on the dollar, and celebrate our good fortune. Sure, we feel sorry for the seller, but only for 10 seconds or so.
Politicians, who are not playing with their own money, apparently take a different view. Elizabeth Warren, chairwoman of the Congressional Oversight Panel, overseeing the TARP transactions, testified to the Senate Banking Committe on Thursday that the U.S. Treasury Department paid $254 billion for assets that were worth $176 billion at the time of the transactions in 2008.
Instead of underpaying for distressed assets, Treasury overpaid.
By my calculation, the sellers now owe the politicians $78 billion in campaign contributions, but I'm sure they'll settle for less.
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