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  • Obama: Read My Lips, No More Bailouts (But Let's Keep $50 Billion Around Just in Case)

    President Obama met today with members of Congress to jawbone them on the pending financial reform bill. A key part of his message: “we must end taxpayer bailouts.” Few statements are less controversial than that. Nobody wants to see more bailouts.

    But wait a second. Doesn’t the very legislation he’s plumping for — and which will soon be voted on in the Senate — itself provides for bailouts. When asked that by a reporter just before the meeting, the President hedged, saying only “…I am absolutely confident that the bill that emerges is going to be a bill that prevents bailouts. That’s the goal.”

    Well, that goal, as it turns out, only survives up to page 134 of the 1,334 page Senate bill. On that page begins a section entitled “Funding for Orderly Liquidation.” The text reads that the Federal Deposit Insurance Corporation, the designated federal receiver for failing financial firms, “may make available…funds for the orderly liquidation of [a] covered financial institution.”

    Where are those funds to come from? Well, on page 272 the bill creates an “Orderly Resolution Fund” within the U.S. Treasury. The target size of this fund? Fifty billlion dollars.

    That sure looks like a bailout fund. Yet, the bill’s supporters deny it. Elizabeth Warren, a leading proponent of the plan, calls the idea that it perpetuates bailouts “just nuts.”

    The argument is that no funds could be provided to to compensate a firm’s shareholders. They would be forced to bear the cost of a firm’s failure, so it’s true they they aren’t being bailed out. But the failing firm’s other creditors would be eligible for a cash bailout. The situation is much like the scheme implemented for AIG in 2008, in which the largest beneficiaries weren’t stockholders, but rather other creditors, including foreign firms such as Deutsche Bank. Hardly a model to be emulated.

    The second line of defense is that, bailout or not, the funds are to come from fees on big banks, not from taxes. But that’s a distinction without a difference — whether it’s called a fee or a tax, the effect is the same. And the fact that it will be paid by “big banks” is hardly cause for relief. Like other taxes, these would certainly be passed on to consumers, who would ultimately pay the tab.

    President Obama should be congratulated for calling for an end to bailouts. Now he needs to find a plan that actually accomplishes that goal.

    Posted in Economics [slideshow_deploy]

    27 Responses to Obama: Read My Lips, No More Bailouts (But Let's Keep $50 Billion Around Just in Case)

    1. Stephen. Johnson Cit says:

      Taken literally, the phrase "we must end taxpayer bailouts" means that taxpayers are not going to get anymore bailouts. It doesn't say a thing about ending bail outs to large banks and corporations.

    2. 333maxwell, Billings says:

      This President is doing a fantastic Job. The last two weeks alone have seen Education reform, the Jobs Bill, Health Care Legislation, a really good Nuclear Treaty that puts nations that do not participate in it on the spot and offers them no guarantee of the protections afforded under the treaty. (Some of the toughest REAL talk I have heard directed at N Korea and Iran for the last few decades).

      Now he has finished the largest nuclear summit of World Leaders since WW2 and his wife is down in Mexico representing all of us remarkably well, and being received as such.

      oh, and did I mention Wall Street has been having an incredibly stable come back and has been closing as strong as it has in several years.

      This President is a fighter, man o man am I glad he is on my side.

      And getting things done.. a more 'experienced' and 'seasoned' politician could never of hoped to pass through the volume of work getting done now. Anyone who underestimates his abilities and political savvy hasn't been playing close attention.

    3. Billie says:

      How does the government come up with a total dollar amount for bailouts, when the government forced means, hasn't happened?

    4. Billie says:

      Ooh sorry. Not sure what I was saying. Of course the governments means of demeaning, degradation, dishonesty, are fully implemented. Nothing but an initial government illusion of "too big to be held accountable to the consequences of your choices," into unfair government manufactured reality, made of government corruption at the expense of the innocent…

    5. Lloyd Scallan - New says:

      When are the people going to realize that every piece of legislation Obama puts forth is NOT to help this country, but to distroy it. Obama is not to be belived

      or trusted. One most understand just what the words he utters/reads are intentionally chosen for their deceptive and anbigusious meanings. Those that

      provide support to his socialist intentions, (Democrats) are doing so blindly,

      some, without knowing what they are supporting. Others, are just as destructive

      as he.

    6. Tim AZ says:

      This appears to me to be another revenue stream through rape and pillage of the private citizen. I wonder who's next after there is nothing left to gain through Mao-Bama's policy of rape and pillage? He probably hasn't thought that far ahead.

    7. Norma in Nebraska says:

      “We must end taxpayer bailouts” – did you notice that the President qualified who was going to pay directly for the bailout? Of course, we know that indirectly it will be the taxpayers . . . nice play on words, Mr. President!

      “Orderly Liquidation Funds” to the tune of 50 Billion Dollars which are going to be used to “bail out” the failing firm’s creditors . . . funds are to come from fees on big banks, not from taxes. Does that mean that the Federal Reserve is printing that money or does that mean that the “big banks” will just charge its customers more in order to recoop the cost of this new “fee”?????

      Well, I have news for those in Washington who obviously have little or no experience with the real world . . . . when big banks have to pay big fees, those costs are passed on to their customers who just happen to be taxpayers in this country!!!!

      I am sick and tired of the “play on words” that we seem to be endlessly swamped with from the Administration and the Congress. A pig is a pig no matter how much lipstick you put on it. The bottom line is that the American citizens will pay the bill one way or the other . . . this kind of politically acceptable double talk has got to stop!!!

      Tell the truth and stop treating us as if we are stupid!!! Boy, November, 2010 just can’t come soon enough to suit me!!!

    8. Drew Page, IL says:

      While you are congratulating Mr. Obama for calling for an end of bailouts, you might want to congratulate him for saying that:

      * he would post all proposed legislation on the Internet for five days so the public would have a chance to voice concerns, prior to his acting on it;

      * he would exercise line item veto authority on proposed legislation containing earmarks;

      * he would call for an open debate on health care reform with health care providers, doctors, nurses, representatives from the insurance industry, the pharmaceutical industry and members of Congress at a big round table, all televised on C-SPAN;

      * he would not hire lobbyists in his administration;

      * he would not increase taxes on family earning less than $250,000 annually, or any individual earning less than $200,000;

      * the Stimulus bill would limit unemployment at 8%; and

      * he doesn’t want to run an automobile company.

      I am sure that Mr. Obama is as sincere about calling for an end to bailouts as he was when he said all of the above.

    9. Stephen. Johnson City, NY says:

      His promise to limit unemployment to 8% is nothing to be proud of or brag about. He needs to reduce unemployment to its historical average ~4.5%.

    10. Pingback: In Their Own Words: Geithner Makes the Case for Permanent Bailouts | The Foundry: Conservative Policy News.

    11. Pingback: In Their Own Words: Geithner Makes the Case for Permanent Bailouts | Step Down Obama

    12. Pingback: Morning Bell: The Wall Street Bailout Bill Threat to Your Bottom Line | The Foundry: Conservative Policy News.

    13. Jeff, Texas says:

      President Osama is not really trying to destroy the nation on purpose. He tries hard to do what is right but has too many hurdles. These hurdles include inexperience and no knowledge of anything he has been tasked with doing. Prior to taking office he had on a scale of 1 to 10: Congressional experience : 2. Leadership experience: 0. Economic/finance/business experience: 0. Military experience: 0. Foreign policy experience: 0. Chicago style politics: 9. Being historic: 10.

      During the campaign, John McCain was portrayed as having no economic experience because it was not as extensive as his military experience. He replied (paraphrased), " After 26 years in congress I have more economic experience in my little finger than Mr. Obama has in his entire body."

      Bright new ideas on managing the country need to be countered with experience to know what works and what doesn't. Mr. Obama has had plenty of recent experiences to learn from. But, alas, the final hurdle: He is unlearnable.

    14. Paula,California says:

      OBAMA-DRAIN THE SWAMP…START WITH YOURSELF AND TAKE NANCY AND HARRY WITH YOU!!!!!!!!!!!!!

    15. Jackie Flaum in Germ says:

      Judging from your remarks on the new 'bailout' of banks you are also opposed to the FDIC which takes in money from fees on banks and covers depositor losses when a bank fails. Are you afraid the proposed fees in the current 'too-big-to-fail' legislation will be passed on the consumer or that the CEO salaries of the 'too big'

      banks may have to go down? I'm sorry, I fail to see your point.

    16. Pingback: floridakeysteaparty.com | Blog | Senate Bill 3217

    17. Tracy, Michigan says:

      Obama was not born in the United States of America, nor was he raised in the United States of America. He does NOT say the 'Pledge of Allegiance' to our American Flag. He does NOT believe in a 'Republic, for which it stands'.

      Do you know what is going to happen if he isn't voted DOWN?

      We will NO LONGER be a free nation.

      The illegal immigrants are being ALLOWED into OUR country for a reason people!!!

      He is (has) going to frighten people into believing the worst…..

      So that he can get HIS laws passed…..

      He wants us to be like Europe. Where the GOVERNMENT RULES.

      Do your homework, and bear your arms….you're going to need it.

      Pray, it's the only hope we have!

    18. RICHARD ELLIOTT says:

      WE CANT AFORD BAILDING EVERYONE OUT. YOU HAVE TO USE THE WORD NO!!!!!!. YOU NEED TO FOUSE YOUR ATTEND ON JOBS.

    19. Rose Temas says:

      I hae a better Idea IMPEACH OBAMA we are sick of how he is ruining our country

    20. Chris, NY says:

      The $50Billion is a Dem "slush fund". Let's be real about this.

    21. AEA says:

      Dear 333maxwell in Billings

      Stop drinking the "kool aid" pal. Your fantastic president is spending this country directly into a brick wall. With every new "reform" we are getting closer to a European style soft tyranny which is why Europens left in the first place. More government is not the aswer to everything that ails us. Wake up before its too late. This guy is as radical as they come !!!

    22. Pingback: Obama/Geithner Plan For Takeover Of America’s Finances | Brees List

    23. Thomas, US says:

      I find it funny when people use the words tyranny and socialism to describe what Obama's administration is doing.

      Starting another war(which cost us billions of dollars and thousands of lives), ignoring the roots of the financial crisis then using taxpayer money to bail out these institutions, and the biggest invasion of privacy(Patriot Act) by government in history were all caused by a Republican administration. I seldom see a republican or Tea-Partier use such language to describe the Bush years. However not 5 months within Obama getting into office their world is turned upside down.

      Why can't we invest our roads, infrastructure, health care , banking and our country instead of destroying and rebuilding another?

      The Tea Party is destined to doom if it affiliates with the GOP. I think this is a likely case for 2010 and 2012, the Tea Party vote will be defacto GOP members, the party being its vehicle for the elections. However, while they will be running on very flimsy agenda of rejection and fear the Dems will be running on a platform of accomplishments and action.

    24. nikia washington says:

      i am a single mom i need help and im trying to go back to school to get my G.E.D. and take up a trade at the same. so can you help. with my bailout. im not asking for much. thank you.

    25. nikia washington says:

      i need help. where my bailout. im single mom trying back to cook to get my G.E.D. and take up a trade. where is my bailout.

    26. Christine MI says:

      Thomas and 333maxwell, you guys need to go back and study your history! Start by looking up all of the terms that are being thrown around like socialism, find out what this stuff means before you go saying it isn’t happening.
      Our president HATES America and is doing a very good job at destroying it.
      I would encourage everyone to read the Constitution and Bill of Rights and then the 5000 Year Leap. It will help clear your vision.

    27. Pingback: Obama Plan Blows Secret Kisses to Wall Street | BeyondBailouts.org

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