Obama tells banks: "We Want Our Money Back"

[RobMoney$]

http://finance.yahoo.com/news/Obama-tells-banks-We-want-our-apf-1137481979.html?x=0&.v=20

WASHINGTON (AP) -- President Barack Obama told banks Thursday they should pay a new tax to recoup the cost of bailing out foundering firms at the height of the financial crisis. "We want our money back," he said.

In a brief appearance with advisers at the White House, Obama branded the latest round of bank bonuses as "obscene." But he said his goal was to prevent such excesses in the future, not to punish banks for past behavior.

The tax, which would require congressional approval, would last at least 10 years and generate about $90 billion over the decade, according to administration estimates. "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," Obama said.

Advisers believe the administration can make an argument that banks should tap their bonus pools for the fee instead of passing the cost on to consumers.

The president's tone was emphatic and populist, capitalizing on public antipathy toward Wall Street. With the sharp words, he also tried to deflect some of the growing skepticism aimed at his own economic policies as unemployment stubbornly hovers around 10 percent.

The proposed 0.15 percent tax on the liabilities of large financial institutions would apply only to those companies with assets of more than $50 billion -- a group estimated at about 50. Administration officials estimate that 60 percent of the revenue would come from the 10 biggest ones.

They would have to pay up even though many did not accept any taxpayer assistance and most that did have repaid the infusions.

Obama said big banks had acted irresponsibility, taken reckless risk for short-term profits and plunged into a crisis of their own making. He cast the struggle ahead as one between the finance industry and average people.

"We are already hearing a hue and cry from Wall Street, suggesting that this proposed fee is not only unwelcome but unfair, that by some twisted logic, it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses," Obama said.

He renewed his call for a regulatory overhaul of the industry and scolded bankers for opposing the tighter oversight in legislation moving through Congress.

"What I'd say to these executives is this: Instead of setting a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I'd suggest you might want to consider simply meeting your responsibility," Obama said.

At issue is the net cost of the fund initiated by the Bush administration to help financial institutions get rid of soured assets. The $700 billion Troubled Asset Relief Program (TARP) has expanded to help auto companies and homeowners.

Insurer American International Group, the largest beneficiary at nearly $70 billion, would have to pay the tax. But General Motors Co. and Chrysler Group LLC, whose $66 billion in government loans are not expected to be repaid fully, would not.

Administration officials said financial institutions were both a significant cause of the crisis and chief beneficiaries of the rescue efforts, should bear the brunt of the cost.

Bankers did not hide their objections.

"Politics have overtaken the economics," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, a group representing large Wall Street institutions. "This is a punitive tax on companies that repaid TARP in full or never took TARP."

Even before details came out, Jamie Dimon, chief executive of JPMorgan Chase & Co., said: "Using tax policy to punish people is a bad idea."

Obama is trying to accelerate terms that require the president to seek a way to recoup unrecovered money in 2013, five years after the law was enacted.

So far, the Treasury has given $247 billion to more than 700 banks. Of that, $162 billion has been repaid and banks have paid an additional $11 billion in interest and dividends.

In Congress, Democrats embraced Obama's proposal while Republicans rejected it.

"I think it is entirely reasonable to say that the industry that, A, caused these problems more than any other and, B, benefited from the activity, should be contributing," said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee.

But GOP Rep. Scott Garrett of New Jersey, who's on Frank's committee, called it a "job-killing initiatives that will further cripple the economy by increasing fees passed on to consumers and small businesses, while reducing consumer credit."

opinions?

[DroppinScience]

The Obama White House acts like they're tough on Wall Street, but their actions are the exact opposite. Just read anything by Matt Taibbi or Paul Krugman. Until I see them follow through on their words, it's just that... words. If they wanted to prove they were serious about curbing Wall Street's sociopathic tendencies, they could start by sacking Tim Geithner (who is basically Henry Paulson v. 2.0).

[RobMoney$]

Advisers believe the administration can make an argument that banks should tap their bonus pools for the fee instead of passing the cost on to consumers.



Good luck with that.

[Echewta]

^ agreed.

[valvano]

how about first they get back the tax money congress has wasted on years and years of failed social policies, military waste and fraud, and failed entitlement programs???



of course, he didnt put the same demands on heavily unionized auto makers who are just as much on the public dole...

[freetibet]

^agreed.

[saz]

has obama grown a pair? if he doesn't follow through on this in a half-assed manner, and actually sees it through in its proper form, it could prove to be a major course correction, something the public has been longing to see. obama should do what volcker is advocating (http://baselinescenario.com/2009/12/17/paul-volcker-picks-up-a-bat/):


We need to break up our biggest banks and return to the basic split of activities that existed under the Glass-Steagall Act of 1933 – a highly regulated (and somewhat boring) set of banks to run the payments system, and a completely separate set of financial entities to help firms raise capital (and to trade securities).

the reform still should reach the same limits as glass-steagall, which even john mccain supports (http://www.newsweek.com/id/226938). (y)


Proposal Set to Curb Bank Giants

By Damian Paletta and Jonathan Weisman
The Wall Street Journal (http://online.wsj.com/article/SB10001424052748704320104575015910344117800.html?m od=WSJ_hps_LEFTWhatsNews)
January 21, 2010, 11:06 A.M. ET.


WASHINGTON—President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country's biggest banks, marking the administration's latest assault on Wall Street in what could mark a return, at least in spirit, to some of the curbs on finance put in place during the Great Depression, according to congressional sources and administration officials.

The past decade saw widespread consolidation among large financial institutions to create huge banking titans. If Congress approves the proposal, the White House plan could permanently impose government constraints on the size and nature of banking.

Mr. Obama's proposal is expected to include new scale restrictions on the size of the country's largest financial institutions. The goal would be to deter banks from becoming so large they put the broader economy at risk and to also prevent banks from becoming so large they distort normal competitive forces. It couldn't be learned what precise limits the White House will endorse, or whether Mr. Obama will spell out the exact limits on Thursday.

Mr. Obama is also expected to endorse, for the first time publicly, measures pushed by former Federal Reserve Chairman Paul Volcker, which would place restrictions on the proprietary trading done by commercial banks, essentially limiting the way banks bet with their own capital. Administration officials say they want to place "firewalls" between different divisions of financial companies to ensure banks don't indirectly subsidize "speculative" trading through other subsidiaries that hold federally insured deposits.

The proposal could have the biggest effect on Bank of America Corp., Wells Fargo & Co., and J.P. Morgan Chase & Co., which control a large amount of U.S. deposits, as well as Goldman Sachs, Morgan Stanley and Citigroup Inc., which have a large presence on Wall Street.

If the proposal took effect, big banks could be forced to wall off certain activities in their investing banking units—which trade and underwrite securities and make their own bets on markets—from their traditional businesses, which make loans and take deposits.

The investing banking units have grown dramatically in recent years, were far more profitable than the banking operations and were at the heart of the financial crisis.

The industry has undergone a major consolidation during the financial crisis, leaving the top four banks with an unprecedented market share in businesses such as deposit taking, credit cards and mortgages.

The rules could also keep banks out of the business of running hedge funds, investing in real estate or private equity, all businesses that have become important, profitable parts of these banks. The collapse of two highly leveraged hedge funds began the process that led to the collapse of Bear Stearns.

If investors believe the new rules could take effect, they could sell off the shares of most of the big financial stocks in the belief these companies would be facing years of turmoil and potentially lower profits.

Messrs. Obama and Volcker are scheduled to meet tomorrow in advance of the White House announcement.

The White House's proposal, one aide said, wouldn't resurrect the exact limits put in place by the Depression-era Glass Steagall Act, which essentially walled off commercial banks from investment banks and was repealed in 1999. Instead, the White House proposal would seek to return the "spirit of Glass Steagall," meant to limit large banks from becoming too big and complex that create enormous risk.

[valvano]

has obama grown a pair? if he doesn't follow through on this in a half-assed manner, and actually sees it through in its proper form, it could prove to be a major course correction, something the public has been longing to see. obama should do what volcker is advocating (http://baselinescenario.com/2009/12/17/paul-volcker-picks-up-a-bat/):



the reform still should reach the same limits as glass-steagall, which even john mccain supports (http://www.newsweek.com/id/226938). (y)

funny no mention of Fannie Mae and Freddie Mac, and still no demand for repayment of funds paid to GM and Chrysler to keep their unions happy.

[Echewta]

I'm a fan of appropriate regulation by the government on big business, espcially since this economic collapse and bail out effected all of us. Thats when the government should be keeping an eye on business and making sure that it doesn't happen again. We will never truely be a free market just like as American citizens, we will never truely be free. Rules and laws are a good thing and I hope Obama's administration does really crack down and not make more "deals" and cave under pressure.

We only are expected to loose 30 billion from the auto loan/bailout Valvano. Thats ok, right? (hhttp://detnews.com/article/20091208/AUTO01/912080414/Obama-administration-predicts-$30B-loss-on-auto-bailout)

[valvano]

I'm a fan of appropriate regulation by the government on big business, espcially since this economic collapse and bail out effected all of us. Thats when the government should be keeping an eye on business and making sure that it doesn't happen again. We will never truely be a free market just like as American citizens, we will never truely be free. Rules and laws are a good thing and I hope Obama's administration does really crack down and not make more "deals" and cave under pressure.

We only are expected to loose 30 billion from the auto loan/bailout Valvano. Thats ok, right? (hhttp://detnews.com/article/20091208/AUTO01/912080414/Obama-administration-predicts-$30B-loss-on-auto-bailout)

not really...the role of govt is not to be propping up any industry that cant survive in the marketplace...if you support the bailout of GM and Chrysler, then you support the bailout of horse and buggy makers, steam engine builders, etc...so $30 billion is a big deal, thats $30 billion in dollars taken from tax payors, passed through un-needed beaurocrats, and handed over to failing corporations that we will never see again....just to appease the largest contigent of democratic supporters, labor unions. we shouldnt have bailed out the banks, nor the auto makers, etc.

[saz]

what about all of the trillions of dollars poured into the catastrophic and illegal invasion of iraq? what about all of the billions of dollars haliburton and private contractors swindled and lost in iraq?

i support the government getting involved when private industry and enterprise fails on such a colossal scale, especially when it means inaction would result in an economic catastrophe on par with the great depression.

[valvano]

what about all of the trillions of dollars poured into the catastrophic and illegal invasion of iraq? what about all of the billions of dollars haliburton and private contractors swindled and lost in iraq?

i support the government getting involved when private industry and enterprise fails on such a colossal scale, especially when it means inaction would result in an economic catastrophe on par with the great depression.

what about the billiions wasted on failed social programs?
what about the billions wasted on overlapping bureaucracies?
what the about the expense of un-needed govt regulations that place american businesses at a competitive disadvantage it the global marketplace?
what about a ruined generation totaly dependent upon their monthly government checks?

govt waste, fraud, etc. exist across party lines, causes, etc. and yet some still feel the american public is still not taxed enough to fund this govt machine.

[saz]

medicare and medicaid aren't failed, they're extremely popular, so much so that you had tea baggers at town hall events this past summer yelling "take your government hands off my medicare" lol.

what overlapping bureaucracies? what uneeded regulations? america could have used regulations prior to the economic meltdown, so it could have avoided it. and a "ruined generation" entirely dependent is ludicrious.

anyways you've changed the subject here. obama needs to carry though on this, and if he is sincere hopefully the senate won't screw up this initiative.

[valvano]

medicare and medicaid aren't failed, they're extremely popular, so much so that you had tea baggers at town hall events this past summer yelling "take your government hands off my medicare" lol.

what overlapping bureaucracies? what uneeded regulations? america could have used regulations prior to the economic meltdown, so it could have avoided it. and a "ruined generation" entirely dependent is ludicrious.

anyways you've changed the subject here. obama needs to carry though on this, and if he is sincere hopefully the senate won't screw up this initiative.

no change of subject here, obama wants the money back spent to bail out banks, i've questioned why he doesnt use the same energy to demand our money back from the auto makers, as well as failed govt programs and spending, etc

and medicare and medicaid arent failed, why dont you compare the original project expenditures of these programs when being considered and voted upon and what they are today...in fact, find any govt program that comes in under the original estimate budget with zero over runs...

[saz]

first i have no clue what "failed" programs you're talking about, it just seems to be some repetitive talking point.

medicare and medicaid were legislated in 1965. it's no longer 1965. the population of the u.s. has since grown, but that also means that there is more revenue. but an unnecessary trillion dollar war, and cutting taxes for the wealthy while waging an unnecessary trillion dollar war isn't helping the cause.


GM to start repaying bailout loans next month

CTV.ca News Staff (http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20091116/gm_3q_091116/20091116?s_name=Autos)
Date: Mon. Nov. 16 2009 2:51 PM ET


General Motors says it may have hit a turning point towards recovery after it posted a smaller than expected loss for the third quarter.

GM announced Monday it lost US$1.2 billion from the time it left bankruptcy protection through Sept. 30.

This is a significant improvement from earlier this year, when GM posted a $6 billion loss in the first quarter.

It says it will start paying back $6.7 billion in U.S. government loans and US$1.4 billion it owes to the Canadian and Ontario governments. The first $200 million payment will be made in December.

It will also pay down $700 million on a $1.3 billion loan from Germany to keep GM's Opel in operation.

GM will give back the U.S. government $16 billion in loans that it had put into a contingency fund in case business made a further turn for the worse. It now says it doesn't need that money and will instead repay the governments.

GM officials said they won't pay the whole amount back in one chunk just in case conditions do change.

If it continues making payments at this rate, it could pay off the entire amount by 2011, which is four years ahead of schedule.

GM says the numbers show that it is improving but it is being cautious about how strongly these numbers reflect positive changes.

It said the results only cover part of the quarter after GM left bankruptcy protection on July 10.

GM entered bankruptcy protection with roughly $94.7 billion in debt. It came out with $17 billion.

Accountants are still cleaning up the books, and revaluing assets and liabilities, and changes to pension and other benefits from a new contract with the auto workers union.

"It's kind of difficult to gauge these numbers because this is the new GM versus the old GM and there's not really sort of anything to compare it to," BNN's Mark Bunting told CTV News Channel.

"Hard to believe that when you lose over a billion dollars that it's actually good news but this is a company that did increase its revenue," Bunting said.

GM says the U.S. Cash for Clunkers rebate program helped boost sales in July and August. Revenue totaled $26.4 billion. Back in the first quarter, it was $22.4 billion.

It also says increased interest in the Chevrolet Camaro, Equinox and GMC Terrain helped fuel the financial gains.

Bernie Wolf, a professor of Economics and International Business at the Schulich School of Business at York University says some of the money was also made overseas.

"The Chinese auto market is booming and they've got a good stake in that and they've made money there," he told CTV News Channel.

He said that positive news on a possible turnaround works to increase consumer confidence in the brand.

"If the company is solid then you can sort of trust yourself to buy another GM vehicle," he said.

But he says the company still has a long way to go.

"The company is kind of starting to move uphill, but boy, that's a high mountain to climb," he said.

An American economist wasn't so optimistic about the state of GM.

"They're constantly saying things are looking pretty good to try and build buyer confidence," Peter Morici, an economist at the Unviersity of Maryland told CTV News Channel.

"GM continues to lose money and until that ends, it's not out of the woods," he said.

"It hasn't downsized enough and it's got a lot of structural problems and is still a long way away until it has the kind of (car) lineup that Ford enjoys."

He says GM is probably repaying the loan now because the interest rates were too high.

"We have significantly more work to do, but today's results provide evidence of the solid foundation we are building for the new GM," CEO Fritz Henderson said in a statement.

GM's Chief Financial Officer Ray Young said it's impossible to compare the third-quarter results to any previous quarter because GM is still reviewing the value of its assets and liabilities post-bankruptcy to comply with accounting principles.

"Direct comparisons are not necessarily applicable. You can make some judgments in terms of trends," Young said.