Obama Wants to Control the Banks

From Saturday’s Wall Street Journal:

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.

If the banks are forced to keep TARP cash — which was often forced on them in the first place — the Obama team can work its will on the financial system to unprecedented degree. That’s what’s happening right now.

Here’s a true story first reported by my Fox News colleague Andrew Napolitano (with the names and some details obscured to prevent retaliation). Under the Bush team a prominent and profitable bank, under threat of a damaging public audit, was forced to accept less than $1 billion of TARP money. The government insisted on buying a new class of preferred stock which gave it a tiny, minority position. The money flowed to the bank. Arguably, back then, the Bush administration was acting for purely economic reasons. It wanted to recapitalize the banks to halt a financial panic.

Fast forward to today, and that same bank is begging to give the money back. The chairman offers to write a check, now, with interest. He’s been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with “adverse” consequences if its chairman persists. That’s politics talking, not economics.

Think about it: If Rick Wagoner can be fired and compact cars can be mandated, why can’t a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can’t special loans and terms be offered to favored constituents, favored industries, or even favored regions? Our prosperity has never been based on the political allocation of credit — until now.

Which brings me to the Pay for Performance Act, just passed by the House. This is an outstanding example of class warfare. I’m an Englishman. We invented class warfare, and I know it when I see it. This legislation allows the administration to dictate pay for anyone working in any company that takes a dime of TARP money. This is a whip with which to thrash the unpopular bankers, a tool to advance the Obama administration’s goal of controlling the financial system.

After 35 years in America, I never thought I would see this. I still can’t quite believe we will sit by as this crisis is used to hand control of our economy over to government. But here we are, on the brink. Clearly, I have been naive.

Eye on the Stimulus

from Pro Publica: Eye on the Stimulus

Governors from four southern states and Alaska have said they’ll refuse at least some of the $787 billion stimulus [1] package Congress hopes will rescue the flagging economy. But an analysis of economic indicators shows that these states – each in their own way – are suffering disproportionately from the economic crisis or longstanding social problems.

South Carolina, where Republican Gov. Mark Sanford was the last state executive to say he would accept [2] stimulus funding Friday,  has the second-highest unemployment rate in the country at 11 percent in February. The state trails only Michigan, where troubled auto companies are shedding workers.

Sanford plans to reject money to expand unemployment insurance, as well as state fiscal stabilization funding [1], unless he can use it to pay down debts [3]. The White House says that money is for building schools, retaining teachers, and other, mainly educational purposes. Budget issues have forced South Carolina to consider laying off teachers [4], whose average salary of $45,758 was already at the low end among states.

South Carolina is also struggling with a budget deficit – 16 percent of total spending this year, the ninth-widest gap in the country. Sanford has said he wants to avoid commitments to long-terms spending, such as hiring new teachers, because it could increase future deficits.

In Louisiana, GOP Gov. Bobby Jindal has said he wants to reject unemployment insurance, too, as well as $9.5 million in Medicaid funds [5] that would buy health insurance for people who have recently lost their jobs.  Louisianans have struggled with health care coverage even in good times: 18 percent of the state’s residents didn’t have insurance in 2007, making it the country’s fifth-worst performer.

Jindal also said he would reject money to expand unemployment [6] insurance benefits because he says there are too many strings attached. Though Louisiana’s unemployment rate is lower than average, at 5.7 percent in February, the benefits the state pays to the out-of-work are the third-lowest in the country, with an average $207 a week.

In Texas, where Republican Gov. Rick Perry plan to decline money [7] to expand unemployment insurance, there are also relatively few jobless people, but as we’ve reported [8]before, fewer than one in four unemployed Texans ever sees a benefit payment. Like Jindal, Perry said he’d turn away $550 million to extend benefits to 45,000 of those people because he’s concerned he’d have to raise taxes in two years to sustain the program after stimulus funding runs out. Haley Barbour, the Republican governor of Mississippi wants to reject [9] $53 million for the same reason.

Those lucky enough to have jobs in Texas pay the second-lowest tax rates [10] for unemployment insurance in the entire country at 0.31 percent of total wages. Louisiana and Mississippi are not far behind, at 0.32 percent and 0.35 percent, respectively. By contrast, Pennsylvania workers pay a full 1 percent.

The other stimulus-opposing governor, former Republican vice presidential candidate Sarah Palin of Alaska, says she’s refusing even more money than her southern counterparts, a full 45 percent of the stimulus money [11] available to Alaska. She wants to reject funding for all programs other than capital improvements.

In Alaska, unemployment has grew to 8 percent in February, worse than the national average. The state has the seventh-highest rate of uninsured people, and more families in trouble rely on a federal program, Temporary Assistance for Needy Families, than in any of the other states in which governors plan to reject the extra help.