By Pete the Banker (which I totally forgot to credit in my haste on Friday–sorry Pete) Barack Obama’s punitive tax proposal is primarily for political reasons to rescue his failing Administration’s agenda, rather than for economic reasons. Despite his earlier voicing concerns about lack of bank lending and languishing economy, he is seeking a tax on the banks which will reduce available Bank capital for lending. His primary reasoning is that the Government needs to recapture “every single dime” from funds advanced to the banks under TARP, despite the fact that many financial firms have already repaid the funds at interest including some who have maintained they did not want the funds at all.
Warren Buffett was among Barack Obama’s strongest business supporters in last years Presidential Election. But he may be having second thoughts. Buffett suggests it makes little sense to levy a Bank tax, reducing capital reserves especially as they are cleaning up their balance sheets. Second and more importantly he points out that Banks have and are paying back TARP funds at a return to the Treasury Department in excess of 10% He also maintains that the Federal Government should no longer backstop or bail out failed Investment Banking firms, perpetuating failed management and their excessive bonuses.
Buffett maintains this tax is simply being levied to cover up for the Administrations support the bailouts non-bank firms such as Fannie Mae, Freddie Mac, AIG and the Automobile Manufacturers, General Motors and Chrysler. In elaborating on the proposed tax Buffet went on to say that,
““some kind of guilt tax,” that is focused on banks that have already repaid debts to the government with interest. “I don’t understand the tax.” and, he went on, ““When the government provided aid to banks during the financial crisis, “all of us were taken care of;” not just the banks, said Buffett.
Buffet also said,
“I’m the last guy to suggest that you should go out and put a special tax on autoworkers, but if you’re really looking for the people that benefited from government losses, you’d have to look there — or if you look at Fannie and Freddie. I mean, are you going to go out and tax the members of Congress who ran Freddie and Fannie?” Buffett said.
It’s time that Obama quits acting expediently, instead making rational Federal Government Policy decisions rooted in the best economic interests of the country. Continually impugning and punishing the very Banks who’s lending creates economic expansion and employment makes little sense during a fledgling economic recovery amidst still fragile capital and credit markets.
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