Friday, January 15, 2010

“We Want Our Money Back”

President Obama has told the banks to cough up.

We want our money back, and we’re going to get it. That’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers.

The big banks are objecting to the idea of paying for screwing up.

Banks are considering an aggressive lobbying campaign to try to defeat President Barack Obama’s new bank fee, arguing that it could cost the economy as much as $1 trillion in lost lending.

“The money to be collected is capital being pulled out of the banking system that could support ten times the amount in new lending,” a senior industry leader told POLITICO. “That’s because $1 in capital supports $10 or more in lending. So the tax will pull not $90 billion in lending capacity out of the banking system, but $1 trillion in potential lending.”

The industry official continued: “The Administration is choosing, it seems, to score political points at a time when millions of American businesses, families, and unemployed workers continue to struggle. Shutting off a trillion dollars in private lending capacity isn’t, in our view, the way to stimulate the economy.”

The White House, anxious to show its populist chops at a time when banks are unpopular, can be expected to welcome the combat.

This is a win-win for the White House. The more the banks object, the more it makes them look like the pompous, privileged sphincters that they are. This also puts the Republicans, the bankers’ natural allies, in a jam: support the banks and oppose the president — which they do without thinking anyway — and they come across to the voters, who are already pissed at the big banks and Wall Street in general, as enablers and defenders of the malefactors of great wealth. The DNC campaign ads write themselves: “Sen./Congressman [_____] sided with the banks while you got foreclosed thanks to the Great Recession that they caused. Do you really want to send this wanker back to Congress?”

The conventional wisdom is that the bankers don’t “get it” — they don’t see the damage they’ve done. Actually, I think they do; I have my own experience in dealing with two big banks in discussing financial difficulties in the last year, and the impression I came away with was that they just didn’t give a shit. While I don’t advocate the draconian measure John Cole thinks will get the point across, making them pay and shaming them in public might do it to some degree.