Courtesy of the folks at The
Daily Grind comes this excellent article, explaining why banks “accepting” TARP
funds may not be been in their best interest after all …. Any why it may just
inch us quietly ever closer to socialism.
More Than They
Bargained For
By Isaac MacMillen and Robert
Romano
It's a little late to say,
“We told you so.” But nonetheless…
Since the bailouts began last
March, 2008, culminating in the $700 billion Troubled Asset Relief Program last
October, and further expanded under the Geithner Treasury's more than $2
trillion Financial Instability Plan, critics across the spectrum have warned
that participants in these federal programs would be signing up for more than
they bargained for.
They warned that those
“loans” would come with strings attached. And, of course, they did. Certainly,
one might think that things couldn't get worse for the banks with the very
public, so-called “stress tests” soon to be unveiled. But, as they are quickly
learning, things can always get worse the more powerful the central government
becomes under the Obama regime.
The danger was accentuated
when Barack Obama fired GM CEO Rick Wagoner as a condition for further
assistance. It was also demonstrated anew, as ALG News has previously reported in “Endgame”, by major
financial institutions being from repaying TARP loans, even though they were
ready, willing, and able to repay them in full.
Now we know why. Over the
weekend, the Administration informed the media of yet another condition under which they can block TARP loan
repayment: National economic interest. According to the Financial Times
article, “Strong banks will be allowed to repay bail-out funds they received
from the U.S. government, but only if such a move passes a test to determine
whether it is in the national economic interest, a senior administration
official has told the Financial Times.”
Said the official, “Our
general objective is going to be what is good for the system.” However, it is
unclear who, exactly, gets to determine what is “good.” Or what meets up with
the “economic national interest.” Though one can make a pretty good guess as to
what the “system” is—and it has already been tried (and failed) in the Soviet
bloc.
Indeed, a transparency watchdog group was forced to file a Freedom Of
Information Act (FOIA) request just to obtain the names of the Treasury
officials responsible for handing out the TARP funds. According to the article,
“Less than half a dozen people are responsible for making the final decisions
about which banks get part of the $700 billion in bailout money available
through the Troubled Asset Relief Program, according to Department of Treasury
officials. In response to a Freedom of Information Act request made by the
Sunlight Foundation in January for the members of the TARP Investment
Committee, a FOIA officer recently responded with just four names…”
What is less clear is by what
process they determine who should receive—and now, who should be allowed to pay
back—TARP “loans.” Are they even following any duly enacted law passed by
Congress and signed by the President? What limits, if any, are being applied to
the powers wielded by the Treasury?
To make matters worse, the
Obama Administration has announced that it will stretch the remaining billions
of last fall's $700 billion TARP funding by converting its bank loans into
stock. In short, by sleight of hand, the government will be able to convert its relationship with the banks from that of “creditor”
to “part-owner.” This is a travesty. And the nation will rue the day.
And once those taxpayer
dollars are invested in the banks, the government by definition obligates
itself to ensure the companies' survival forevermore—just as it did for Fannie Mae
and Freddie Mac when they failed—so as to keep the welfare program, whether it
be a housing program or otherwise, afloat.
Unfortunately for taxpayers,
it actually takes an efficient business model to make a profit. And it is
already with gross incompetence that the federal bureaucracy is overseeing the
banks, increasing the chances of the government will bury these institutions,
and erase any incentive for private capital to form the basis of the financial
sector. And that applies whether they use the Amtrak, post office, or Social
Security models for government efficiency.
This is a quiet
nationalization, but it is nationalization to be sure. The feds are expanding
the amount of taxpayer dollars in the coffers of banks, till the banks become
no more than de facto federal agencies.
At which point, American
taxpayers will have zero hope of ever seeing their money back, for that can
only happen so long as the banks remain in private hands. And that is an
increasingly long shot, for as it stands now, firms attempting to repay loans
are being turned away by a government that refuses to let go of its tyrannical
leverage.
So how will a bank avoid
finding itself under the iron hand of government control? The easy answer would
be to repay the TARP loans and thus remove the government's boot from the
bank's throat. Unfortunately, that may be easier said than done.
With both JP Morgan and Goldman Sachs now publicly expressing their
desires to repay the TARP loans, the federal government is reacting by
throwing an entire obstacle course in their way. With tactics as simple as not
telling the CEOs whom to write the check to, to schemes as elaborate as announcing
a “stress test” (to be unveiled in May—giving the government enough time to
make it as complex as possible, no doubt), the feds are doing their best to
avoid relinquishing their hold on the nation's financial institutions.
And, yet, its no wonder that
these banks want to be free from government influence. The Wall Street Journal quoted financial analyst Peter Cohan,
who stated that those banks who repay government funds could have a market
advantage. “It could cause business to flow toward the banks that paid TARP
back and away from those who haven't,” he stated.
It's little wonder, then,
that despite the government's insistence that its market interference is for
the common good, many Americans are beginning to question the government's
level of involvement in their daily lives. A new poll reveals that 52 percent of Americans are concerned that the government will
do too much in reaction to the economic situation, the highest percentage
since last October.
And just last week, hundreds
of thousands of Americans joined together on Tax Day to register their
opposition to the continued government hegemony over the economy. With slogans
such as “keep your hands off my bank,” they protested the bailouts, national
debt, and wasteful spending that has so characterized “Obama's America.”
In spite of attempts by the
mainstream media to paint them as a fringe movement, Americans had a “favorable” view of the tea parties by a 51-33
percent margin, with only 15 percent unsure. Tellingly, only 13 percent of
the “political class”—an attitudinal term used by Scott Rasmussen—had a
favorable view. According to Rasmussen Reports, “Those in the Political Class
tend to have more confidence in political leaders and less trust in the wisdom
of the American people.”
The success of the tea
parties has made it clear that the government's continued forays to pillage and
plunder private enterprise are at their own risk, and are increasingly
unpopular. And with the crypic way this supposed “open” and “transparent”
government has been operating, that is no surprise.
Despite the promises of transparency and openness, the Obama
Administration has been icily secretive about how the bailout money is being
spent and who is spending it.
Even their political allies
in Congress have complained about how tight-lipped the Administration has
become, with the TARP oversight committee chairwoman complaining that the lack
of transparency is hurting her ability to fulfill her mission. And the ranking Republican on the Senate Finance Committee added
his frustration: “You can't measure effectiveness when you don't know what
the goals and objectives of a program are, or how the program is being run.”
Of course, none of this
should be surprising. Once the government gains any amount of control, it is
loath to lose it. And it is likely to abuse it. Having poured, lent, and
pledged more than $13 trillion of taxpayer dollars into the teetering financial
system, the federal government is now flexing its muscle at its pigeons'
expense.
To avoid relinquishing
control, it is moving the goal posts just beyond reach to perpetuate the
crisis, making those conditions so difficult that the banks will be
“encouraged” to “choose” to stay under its iron wings—just as the Russian
satellite states “chose” to join and then “remain” with the USSR. And this is
nothing short of brutal coercion.
In the end, the banks who
accepted the TARP loans will realize—all too late—that their offer to play by
the rules was not enough to satiate the feds. They made a loan of cow; now they
want the farm. And they are willing to take it by the force of law.
Somehow, a “we told you so”
just doesn't quite cut it—especially since those upon whose ears it would fall
are already paying with their liberty for an unwelcome lesson.
ALG CTA: The Geithner Treasury is reaching
the final stages of its bank nationalization plans. If banks are prevented from
paying back the TARP loans prior to the so-called “stress tests” being
unveiled, it is likely that the central bank will use those “tests”—built using
their own criteria—to mandate permanent government assistance and never let the
“loans” be paid back. Coupled with their plans to convert loans into stock,
this is nothing short of tyrannical coercion by the Treasury to seize control
of the financial institutions. Call Timothy Geithner and tell him to keep his
hands off your bank at (202) 622-2000.
Isaac MacMillen is a Contributing Editor of ALG News Bureau. Robert Romano is the Senior Editor of ALG News Bureau.
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