• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • President Obama and the War on Banks

    Forget the war on terrorism, the war on drugs, even the war on poverty. President Obama seems to have declared a new war, a war on banks. It was launched last week with the proposal of a “bank tax,” supposedly meant to get TARP bailout money back to taxpayers (although it would leave out firms such as General Motors that actually owe most of the money). It continued yesterday with the President’s proposal of new bank regulations — limiting what banks can invest in as well as limiting to total size of financial institutions.

    There’s not much to recommend either proposal. Neither would do much to avoid another financial catastrophe. In fact, by limiting the scope and size of an institution’s investments, there’s a good chance that they would make the system less, not more, stable.

    And it isn’t just the president’s opponents who are skeptical. Reportedly, Treasury Secretary Tim Geithner, along with White House economic advisor Larry Summers, fought hard internally against the proposals, arguing that they would unnecessarily damage the international competitiveness of the financial sector. But, they, apparently, were overruled.

    The reason isn’t hard to see. Despite (or perhaps because of) the potential damage to financial firms, the politics of a war on Wall Street must have been irresistable. Who likes bankers anyway? What better way to pump up sagging poll numbers than to pick a fight with them? The President all but said as much, stating: “So if these folks want a fight, it’s a fight I’m ready to have.”

    The dangers of the regulations, and — perhaps more — the virulence of the populist rhetoric, sent the markets into a tailspin yesterday, with the Dow losing 213 points yesterday and another 216 today. It’s unclear exactly what effect the drop will have on White House strategists, however. The goal, after all, was a war on Wall Street, so couldn’t have been surprised that Wall Street recoiled. And on the Left the new hard line against the capitalists was greeted with applause. France also congratulated Mr. Obama, saying they were glad to see him following their lead, although it wasn’t clear how welcome that embrace was).

    But will the average American side with the President? Certainly, there’s lingering resentment against banks in the wake of the TARP fiasco. And reports of big bonuses this year certainly won’t win banks any popularity constests.

    But there’s reason to believe Americans won’t be led so easily. Bankers as a whole certainly aren’t loved, but polls show politicians coming in even lower. And outrage over bonuses and other abuses is concentrated on those using taxpayer money.

    Second, the ultimate judgment on Obama’s policy will be the results. And, however populist, a policy that hurts the economy, and reduces jobs, won’t win brownie points.

    Lastly, despite the President’s assertion that his plan would assure that “[n[ever again will the American taxpayer be held hostage by a bank that is too big to fail,” American’s will likely take that — as they should — with more than a few tablespoons of salt. Not only are the new reforms unlikely to ward off future bailouts, but the other financial reforms now pending in Congress would actually make them more likely. And the Administration’s insistence that the TARP program itself continue won’t help the message.

    The Administration’s bank war is a fairly transparent attempt to score political points at the expense of good policy. The good news is that Americans should see through it.

    Posted in Economics [slideshow_deploy]

    12 Responses to President Obama and the War on Banks

    1. Bobbie Jay says:

      Obama is threatening a fight so he can take over the banks after he set them up to look bad. Claiming banks discriminate? Yes, Obama, in order for a bank to conduct it's business, those who want to borrow, need to pay it back under the contract of the loan. If the person's background doesn't show the ability to pay back, they get NO LOAN. The only supporters obama has are those they aren't willed to follow the same rules or aren't willed to do for themselves.. Get out of our country, Mr.. O. YOU DON'T FIT IN!!!!!.

      ARREST ME OBAMA! I discriminated against a pedophile, who applied for a babysitting job! ARREST ME NOW!!

    2. NJ says:

      Oddly no mention of Fannie or Fred. I can't imagine why

    3. C. Sutton, Washingto says:

      No one will ever convince me that we would have been worse off if the banks, AIG, car companies etc. had been allowed to "fail" if in fact they actually were going to. True capitalism is the ability of smart companies to overtake and buy out the weak companies. Smaller banks would have bought up the parts of the banks that failed, Fannie Mae and Freddie Mac would now be insolvent (a good thing) student loans would be competitive, autos too, and AIG's mess would have been parcelled out as well. That's what real capitalism does when it is allowed to. This "bail-out" mess, started as a "controlled burn" by Paulson, Bush and Bernanke, has turned into a raging Southern California wildfire, with Obama and crew running around the forest with their pants on fire. Meanwhile, businesses and banks are paralyzed, and homeowners need a snorkel to pay their bills.

    4. clfgef says:

      Obama's faux outrage at bankers is at least in part a petulant tantrum because of the Brown upset in Mass. He is heedless of the collateral damage to the economy that results from such egocentric outbursts.

      Though as you note, the average citizen has now removed the rose tinted glasses, and sees through peevish fog from the White House.

    5. Pingback: Obama, high on Liberal ‘Balls Beer,’ goes Don Quixote on America « VotingFemale

    6. SB Owner Springfield says:

      Government ordered through CRA, HUD, Reno, Fannie/Freddie to force banks to make loans they would not have made. Helped by ACORN. The result, financial meltdown.

      The government places oppressive regulations upon auto industry. The result? The takeover of GM and Chrysler.

      Democrats insist upon a public option in the now failed Health Care reform bill. What would have been the result? Elimination of private sector health care insurance and single payer governemnt run program.

      Is the intent now to plant the first seeds that will lead to the nationalization of banks? Obama must demonize whatever business he wants to run as a first step toward that end.

      This misguided Obama policy will only cause harm to the economy and drive up unemployment when small businesses can't get loans, as if it were easy to get now. Perhaps Obama will get hoisted by his own petard on this one.

      Did anyone tell Obama banks will be able to exercise free speech in the upcoming elections?

    7. Pingback: Must Know Headlines 1.24.2010 — ExposeTheMedia.com

    8. Pingback: Obama’s Failing War on Reality; it is antipathy to Socialism, Barack « VotingFemale

    9. Jill, California says:

      Let's call this what it is. It's not a war on the banks. It's a war on bank customers. It's a tax on bank customers.

      We are the ones who will pay the increased taxes and fees. We are the ones who will be unable to get loans when we need them. We are the ones who will receive little to no interest on our savings accounts and IRAs.

      And Obama's tough talk about picking fights is about picking fights with us. When he throws his punches, the banks just duck. We're the ones with bloody noses.

    10. Steven Gorrell; Sout says:

      I see (along with many other Americans) the banks are a small part of the problem with our economy. The big problem is the Federal Reserve Bank. They create money out of nothing (print it up!), loan it to the banks and collect interest on it and when banks fail, the American public gets caught holding the bag. Aren't you glad you are so generous? I don't see hardly any analysis of the problem in Heritage articles and it's troubling. Bernanke refused to answer questions from our elected officials this year about disbursement of public monies. Now this week we are getting threats in the media if he is not confirmed for another stint as Federal Reserve Chairman our economy will be in peril. My fellow Americans, we have put Dracula in charge of the bloodbank and the patient is terminal.

    11. Pingback: The House and Senate Cloakroam: February 1-5, 2010 | The Foundry: Conservative Policy News.

    12. Pingback: Obama’s Backdoor Taxation And The Coming Consequences Of Obamanomics « Start Thinking Right

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×