Obama refusing repayment of TARP

Why would the White House refuse TARP repayment from banks? After all, it's millions and trillions of dollars we're talking about, not exactly pocket change.

Could it be that the administration wants to maintain power over these TARP recipients? This is very troublesome to know. It clearly shows the administration intends to push its own economic agenda to these financial institutions, and by now many of them are regretting to ever have received these government funds.

What's happening now is that the bank executives actually work for the federal government. These banks are no longer serving consumers, but rather serving its master, the gigantic federal government. The government will now dictate who runs the banks, who to lend money to, the interest rate, etc. Does that sound like a healthy banking system?

Obama thinks he's protecting bank CEOs

"My administration is the only thing between you and the pitchforks." That's the message the President gave to bank CEOs during a meeting at the White House. This is interesting and sheds light into this administration's psyche.

First, the administration thinks it is rescuing the banks and serving the people. Nobody disagrees that the banks are in trouble. Many people are angry. But the actions of the administration so far really does not have Americans' interest in mind. The Treasury is pouring money into an ailing financial system, what many thinks is just propping up a dead body. The government is removing the risk from the banks, and that is detrimental to a healthy capitalism. Wall Street rose to become a world financial center not because the entrepreneurs and executives avoided risk, but how they took risks and reaped the rewards.

The trillions of dollars injected into the system are sending the country into an abyss of debt, and ironically Communist China is the one hoarding U.S. treasuries. The well-being of future American generations now lay in the hands of Red China.

Secondly, it is clear the administration, along with the liberal Democrats' control of the Legislative branch, are taking advantage of our financial vulnerability to expand their powers. Congress has passed laws that members and the public had no time to scrutinize, giving the Treasury unprecedented powers over corporations receiving government money. Executive compensations are limited, and CEOs and board members are appointed by Washington.

Third, the fear mongering has driven some people to irrationally despise everything Wall Street. Never mind how Wall Street has helped the country to become a world economic power. Never mind how Wall Street has made money for countless investors. And never mind how Wall Street has provided the millions of jobs for Americans and even foreigners. The fear mongering merely deflects the attention that should be given to the perils of government intervention, namely Freddie Mac and Fannie Mae. This two-headed monster in the course of a few decades brought the housing market to its knees today. And not surprisingly, the main political benefactors from Freddie and Fannie and from this crisis, have been Democrats and their sprawling entitlement programs...

Sorry, President Obama. You are arrogant to think that your administration is protecting these CEOs from the population.

Barney Frank wants to control your pay

The government has successfully put a limit on top executives working in firms receiving bailout money. Now Rep. Barney Frank (D-MA) wants more control in how all employees of these firms are paid:

But now, in a little-noticed move, the House Financial Services Committee, led by chairman Barney Frank, has approved a measure that would, in some key ways, go beyond the most draconian features of the original AIG bill. The new legislation, the "Pay for Performance Act of 2009," would impose government controls on the pay of all employees -- not just top executives -- of companies that have received a capital investment from the U.S. government. It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.

The purpose of the legislation is to "prohibit unreasonable and excessive compensation and compensation not based on performance standards," according to the bill's language. That includes regular pay, bonuses -- everything -- paid to employees of companies in whom the government has a capital stake, including those that have received funds through the Troubled Assets Relief Program, or TARP, as well as Fannie Mae and Freddie Mac.

The measure is not limited just to those firms that received the largest sums of money, or just to the top 25 or 50 executives of those companies. It applies to all employees of all companies involved, for as long as the government is invested. And it would not only apply going forward, but also retroactively to existing contracts and pay arrangements of institutions that have already received funds.

In addition, the bill gives Geithner the authority to decide what pay is "unreasonable" or "excessive." And it directs the Treasury Department to come up with a method to evaluate "the performance of the individual executive or employee to whom the payment relates."

Again, once the government gets a taste of new power, it never relents in grabbing more.

General Motors is now Government Motors

There is a troubling trend in the relationship between American companies and the American government since Obama took office. Companies are failing, but also failing to enter bankruptcy, a norm in a healthy capitalist society. Rather, the federal government prefers to provide loans and inject capital into them, in turn prolonging the suffering of the firms and of the taxpayers as well. And because of these government funds, now it owns shares of companies, and is even dictating how to run them, on Wall Street and in Detroit.

The latest casualty is General Motors, once an American -- no, global -- icon. Rick Wagoner is now an ex-CEO, to be replaced by COO Fritz Henderson at the demand of the White House. Yes, you read it correctly: it's the President that's telling G.M. how to operate now. Welcome to the new Detroit, folks.

The auto industry has roots so deep in Detroit, Michigan that I wouldn't be surprised one bit if the White House starting handpicking the mayor and governor for the city and state! Heck, just annex Michigan into another federal jurisdiction! Washington, D.C. is still the capitol, but Detroit, D.C. can be where the federal government runs businesses.

More about the unconstitutional bailout legislation

There has been a lot of interest in the constitutionality of the Emergency Economic Stabilization Act of 2008 (EESA) and the TARP funds. I see a lot of Internet searches about this. George Will has a very good piece in the Washington Post about this topic:

By enacting it, Congress did not in any meaningful sense make a law. Rather, it made executive branch officials into legislators. Congress said to the executive branch, in effect: "Here is $700 billion. You say you will use some of it to buy up banks' 'troubled assets.' But if you prefer to do anything else with the money -- even, say, subsidize automobile companies -- well, whatever."

FreedomWorks, a Washington-based libertarian advocacy organization, argues that EESA violates "the nondelegation doctrine." Although the text does not spell it out, the Constitution's logic and structure -- particularly the separation of powers -- imply limits on the size and kind of discretion that Congress may confer on the executive branch.

One of the beauties of the U.S. Constitution is separation of the three branches of power: Executive, Legislative, and Judicial. With EESA, Congress is giving the president unconstitutional powers by allowing him to write the specifics of the law, i.e. how the money is to be appropriated. That should be Congress' job!

Taxpaying citizens like you and I ought to be enraged by this! It's evident that we have a lazy Congress bowing to the demands of a fear-mongering President. And now the next two or more generations of Americans are to pay for the astronomical debt -- bought up by the billions by Communist China. The consequences of ignoring the Constitution is grave...

Resignation letter from an AIG executive

From Jake DeSantis, Executive V.P. of AIG Financial Products, to Edward Liddy, CEO AIG, with love. Here is an excerpt:

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

Is this any surprise? Because of the government witch hunt, Wall Street is losing honest, hardworking, seasoned executives like Mr. DeSantis. New York City will no longer be a beacon of capitalism, but a swamp of mediocre bureaucrats treading about. If $500,000 is the most money one can make in Wall Street, who would even want the job? The pay sucks, and the work hours are long.

Mr. DeSantis, I feel sorry for what you (and your family) had to go through recently. Best wishes in your next endeavor. We can only hope you choose to remain in the U.S. as a productive worker instead of joining other firms overseas.

Newspapers as nonprofits

Sen. Benjamin Cardin (D-MD) proposes legislation to allow struggling newspapers to operate as nonprofits similar to public broadcasting stations. Revenues would be tax-exempt and they wouldn't be allowed to make political endorsements. Sounds like a workable idea, but I wonder if it could be executed in the real world.

The mainstream newspapers are so saturated with liberal reporters and journalists that it'll be near impossible for a nonprofit newspaper to be unbiased politically.

And even if this doesn't sound like a true bailout in the Wall Street sense, it's still going to impact the taxpayer's wallet. These newspapers are struggling because nobody wants to read them. By allowing them to become nonprofits, they still need money to operate, and without enough subscribers, that's still a problem. Then what? Will the government subsidize them then?

In today's tough economic time about every business is struggling, but not every one of them is asking for help. The newspaper business is like any other business. If you cannot turn a profit to stay in business by conserving cash and evolve your business model, you may not deserve to be in business considering there are no consumers.

Administration wants expanded authority to seize firms

Not wasting a good crisis, indeed! Team Obama could seek more power for the Treasury Department to seize non-bank financial companies like insurers, hedge funds, etc. Currently only banks can be seized by the government.

This is a dangerous path. What's next? Nationalization of the oil companies?

Nobody to blame but the Democrats

How many Republicans voted for the stimulus bill? None.

Now it's widely known that the multi-billion dollar stimulus bill contains verbiage to allow executives to keep their bonuses, it's time for the Democrats to be accountable.

The bill is 1,000 pages or so, and granted, some honest Democrats admitted they didn't read over the whole thing. But then there are lawmakers like Dina Titus (D-NV) who was either too embarrassed to admit to that, or she did in fact read every page and allowed the executive bonus provision to pass.

Either way, the Democrats and the Democrats only are on the hook for this. And now they want to pass a bill to tax these bonus recipients at 90%. Clearly, they admit to their incompetency by even drafting the CYA bill.

This is how our legislative branch works now? Take no time to review and debate a bill, pass it in a hurry, and if lawmakers don't like something in it just write up another bill to make things OK?

What a sorry state our Congress has become, especially those in power.

Gov. Palin says no to half of federal stimulus money

Gov. Palin of Alaska will refuse nearly half of federal stimulus money, standing firm to keep state government small. The state Democrats, of course, say her actions aren't for the sake of Alaskans, but for her Washington political ambitions.

I applaud Gov. Palin and other governors like her who doesn't want Washington to engineer their states' future!

Congress passes law to tax TARP company execs

In the latest development stemming from the AIG executive compensation mess, Congress passes a bill to tax at a higher rate of executives and employees of companies receiving TARP funds. The Democrats are eager to clean up this mess, therefore wasting no time to draft this legislation and put it to a vote.

But aside from the glaring tactic of political distraction, this piece of legislation should be a cause of concern for everyday Americans. Congress is essentially wearing the hat of a judge, determining who is guilty, and using confiscatory tax rates as punishment.

Andrew Grossman at The Heritage Foundation has a very good analysis:

Whether the legislation before Congress is a bill of attainder, and therefore unconstitutional, is a difficult question not susceptible to any certain answer under existing judicial precedent. But whatever the answer, the legislation does raise strong constitutional concerns animated by the purposes of the prohibition on bills of attainders. The legislation (H.R. 1586), as introduced by Rep. Charles Rangel (D–NY), would apply to income received in 2009 and thereafter by employees of companies receiving more than $5 billion in federal bailout funds, as well as to Fannie Mae and Freddie Mac. The bill defines a new class of income, "TARP Bonus," that consists of any compensation payments in excess of a periodic wage and any income for such employees in excess of $250,000, or $125,000 for married individuals filing separate returns. Under the legislation, any "TARP Bonus" would be taxed at a 90 percent rate.

Article I, § 9, of the Constitution states: "No bill of attainder or ex post facto Law shall be passed." The prohibition has several purposes. First, it enforces the Constitution's separation of powers, thereby protecting individual rights. The judiciary, not the legislature, is the branch that judges the application of the law to specific individuals and entities, resolving the disputes before it on an individualized basis and ensuring that each case is afforded due process. For Congress to adjudge specific parties guilty and due certain punishment would necessarily intrude on this power. The result, as the Framers well knew from the country's colonial experience, would be legislative tyranny: Britain's parliament regularly enacted laws naming or describing particular individuals and sentencing them to death for some asserted infraction, usually treason.

And that's just the start. Read the whole thing... Congress may be crossing its boundaries here.

Stimulus bill allowed executive bonuses

The fury over AIG executive bonuses is now snowballing towards the White House, Congress, and all those in between who'd voted for the stimulus bill. Apparently the infamous stimulus allowed for executive bonuses that so many are ticked off about. And the man who's receiving most of the finger pointing? None other than Sen. Chris Dodd (D-CT), who happens to be the top recipient of AIG political contribution (then Sen. Obama is #2). Sen. Dodd is being blamed for inserting the executive compensation clause into the stimulus bill, and believe it or not, he's blaming Obama for requesting it!

Oh goodie, in-fighting among top Democrats...

Anyone with a "D" next to their written names is staying as far away from this mess as possible. Nobody wants to be near Sen. Dodd, Tim Geithner, or even President Obama these days. What AIG CEO Edward Liddy went through recently is nothing compared to what's going to happen in the Hill.

There's been calls for Geithner's resignation. I'm sure these calls are going to turn into a chorus pretty soon.

Selling policies to Americans on late night talk show

The first black presidential candidate of a major political party. The first black president. Soon he'll be the first sitting president to appear on a talk show. (Yes, another historic event! Now go on with your lives, please.)

Jay Leno and his producers would be proud. Clearly the White House thinks Obama supporters are the young, hip, night owls and couch potatoes, and by doing the Leno interview he'll be more effective in pushing his expensive and expansive policies. Well, good luck with that now that a lot of these supporters are also jobless and upside-down on their mortgages...

The majority of Americans have no desire for more bailouts. If Obama and his Democrats cannot understand this and continue to push their anti-capitalistic agenda, it will backfire on them as soon as 2010.

AIG a top Obama political contributor

This whole show from President Obama and his crew on the AIG bonuses sickens me. Not only has the administration showed its anti-capitalistic nature with executive pay limits and crying foul about bonuses, but the mainstream media isn't covering the fact that AIG contributed big money to Sens. Chris Dodd and Barack Obama.

Now the W.H. claims it didn't know about these bonuses until March. But wait, I thought this administration is all about transparency! The government gave monetary aid to AIG last fall. Is the W.H. saying that nobody keeps track of any of this money?

What about Fannie and Freddie bonuses?!

Enough about AIG. Let's move on to Fannie and Freddie, and the reported half-a-million dollar bonuses for four executives. This whole bailout deal stinks to high heaven!!!

FDIC asks for bailout, now taxpayers insure themselves

The FDIC is out of cash and will get $500 billion. So now us taxpayers are paying our own money to insure ourselves. If this doesn't convince you that we have a really screwed up economy, I don't know what will.

Something stinks at the Fed

Whatever happened to the promised transparency in providing billions of bailout money to troubled banks? Bloomberg News, like many of us, wants to know more about how the money is spent, but the Fed is refusing to release any details, citing "trade secrets." Something definitely doesn't smell right in this whole business...

Obama the socialist

Is there still any doubt? Actions speak louder than words, and the 30 days that Obama's sat in the White House he's shown us his far left philosophy in government and taken America a step closer to socialism than ever before.

His mortgage bailout plan is just another entitlement program to redistribute income of the responsible home owners to the irresponsible ones who moved into a house they cannot afford. Per Larry Kudlow, and I agree completely:

Team Obama is rewarding bad behavior. It is enlarging moral hazard. It is expanding its welfarist approach to economic policy. And with a huge expansion of government-owned zombie lenders Fannie Mae and Freddie Mac, Team Obama is taking a giant step toward nationalizing the mortgage market.

The creation of Fannie and Freddie was bad enough, and with this proposed mortgage bailout, the government will indeed reward bad behavior. Life is a series of decisions and their consequences. Make good decisions to be rewarded. Choose poorly and suffer the negative consequences. Where in the Constitution does it say for the federal government to bail us out in cases of irresponsible personal decisions? That's all it is. Poor decision making.

Okay, some folks will blame their employers: My company laid me off and now I have no income to pay for mortgage. First of all, why didn't you save money for the "rainy days," an emergency fund? Secondly, you can't possibly expect to live the same lifestyle without regular income, so start Plan B -- move out! Find a cheaper place or become a renter. Don't wait for the government to help you.

Or blame the health care: I got really ill and had to pay for medical expenses, falling behind on mortgage payments. Health care is a high priority. Each paycheck should have some set aside for health care, whether from the employer or other means. If you cannot pay for health care and a house, then you should live in another place or find another job which has better benefits. Again, where's that rainy day fund? Don't wait for the government to take care of you!

To a socialist, the current economic meltdown is the perfect storm to expand government control of citizens' lives. Strike fear in the hearts of certain individuals -- those without the will or perseverance to dig themselves out of a hole -- to achieve control of their lives through more bloated entitlement programs. Let the responsible neighbor tap into his or her emergency fund (or kids' college tuition fund or retirement fund) to indirectly pay for my mistakes in the form of them paying higher taxes.

There are those like Leon Wieseltier of The New Republic who doesn't see it this way, but rather:

The most discouraging surprise of Barack Obama's early days in office, days of emergency, was the new administration's shirking of clarity, its reluctance to attach the grandeur of its initiatives to the grandeur of liberalism. Instead the president's distaste for division, and his Chicago practicality, set the tone. How came it to be that in the aftermath of the greatest liberal victory in our lifetime John Boehner held the stage? Of course the views of the Republicans must be respected, not least when a few of their votes may be needed to do the work of rescue and reform; but political respect must not be confused with intellectual respect. The response of the right to the crisis in America was to flee to its catechism. The Republicans propose to bail out the economy with doctrine. Unemployment is 7.6 percent and rising, and they say: let them eat Friedman. When billions and billions of dollars are needed for the Pentagon (fine with me) and for Wall Street, it is damn the zeroes, full speed ahead--but when the prospect of relief for ordinary Americans in trouble rears its fair and compassionate head, the deficit desperately matters again. The Republicans are not only heartless, they are also hypocritical, since the cause of all this misery was the market abandon that they promoted so messianically. These are the people who would have privatized, that is, destroyed, Social Security: how can their protests not be met vehemently? This vehemence is not "partisanship," it is analysis. It is not "populism," it is liberalism.

Liberals love to bring up "relief for ordinary Americans," as if responsible, financially sound, hard working Americans aren't "ordinary." It's a sad trend that if you are not in credit card debt, pay your mortgage on time, and have no car payment, then you are not ordinary in today's economic categorization. Never mind labeling Republicans as heartless and hypocritical as well, and blaming all the economic problems on conservatives' insistence and embrace of capitalism. Just ask: Which socialist countries thrive to become leaders of the world economy?

Conservatives have long questioned Obama's "change" when he was campaigning: change for the better or for worse? Unfortunately, ever since he entered the White House, most people are predicting the latter: change for worse.

Wealth-envy galore

Wall Street certainly bears the blame for a significant portion of today's economic meltdown, but seriously, they aren't the real problem. Regardless, this has brought about the wrath of anti-capitalists, socialists, and wealth-envy sufferers. Here we have Eugene Robinson clamoring over Sen. Claire McCaskill's (D-MO) rant about overblown executive compensation:

McCaskill introduced a bill to limit compensation at any company receiving bailout money to $400,000 -- the salary of the president of the United States. It's hard to improve on her words: "We should have done it in the first place. But I don't think any of us thought these guys were this stupid. I don't think any of us believed that they would take billions of dollars in bonuses while their institutions were literally days from being wiped out. But they did. And we've learned our lesson."
...
Things have changed. No longer does it seem reasonable -- if it ever did -- that the average CEO makes 344 times as much as the average worker, as estimated last August by the Institute for Policy Studies and the nonprofit group United for a Fair Economy. No longer does it seem acceptable that John Thain, the since-ousted Merrill Lynch chief who ordered those accelerated bonuses that so irked McCaskill, would spend $1.2 million of his fast-sinking firm's money to redecorate his office -- and then, with Merrill's losses being revealed as even greater than feared, request a bonus of up to $10 million for himself.

No longer does it make any sense to reward those who work in the financial industry so lavishly compared to the way we compensate those who, say, build tractors or write software or teach our children. Salaries should be reasonable and bonuses -- much more modest ones -- should be reserved for those who actually, you know, make money. If some of Wall Street's vaunted "talent" balks and flees, terrific. It was "talent" that got us here.

What are these people smoking? So there are several big financial institutions on the brink of failing because of poor management, and the management has changed after receiving bailout funds from the government, and now Sen. McCaskill wants to cap their yearly salary to $400,000? What sane executive would want the job?! Isn't it more important to offer competitive compensation to attract good executives to revive the companies? By introducing such a bill, it seems Sen. McCaskill, with the support of columnists like Robinson, want Wall Street to utterly fail. Maybe they prefer a government-run Wall Street.

Big shot executives like John Thain now have a big stain on their resume. That's part of how capitalism works. The market will decide how much somebody like Thain is worth. Don't bring the government into it.

More thoughts on Wall Street's spending habits

Citigroup was caught red-handed trying to buy a $50M Dassault Falcon 7X corporate jet and received a call from the White House to cancel that order. After all, it's not the best way to spend billions of bailout money from the government. Columnists on the left are digging in their heels about this. Maureen Dowd at the NYT:

The former masters of the universe don’t seem to fully comprehend that their universe has crumbled and, thanks to them, so has ours. Real people are losing real jobs at Caterpillar, Home Depot and Sprint Nextel; these and other companies announced on Monday that they would cut more than 75,000 jobs in the U.S. and around the world, as consumer confidence and home prices swan-dived.
...
Bartiromo also asked Thain to explain, when jobs and salaries were being cut at his firm, how he could justify spending $1 million to renovate his office. As The Daily Beast and CNBC reported, big-ticket items included curtains for $28,000, a pair of chairs for $87,000, fabric for a “Roman Shade” for $11,000, Regency chairs for $24,000, six wall sconces for $2,700, a $13,000 chandelier in the private dining room and six dining chairs for $37,000, a “custom coffee table” for $16,000, an antique commode “on legs” for $35,000, and a $1,400 “parchment waste can.”

Okay, so maybe it was a poor decision made by Citigroup executives to buy a multimillion dollar jet after the taxpayers have funded the company. Maybe Thain, former CEO of Merrill Lynch, shouldn't have spent so much on an office renovation.

On the other hand, the stimulus package in debate right now is about spending, isn't it? The only difference between that bill and what these CEOs have done is who gets to spend. The Democrats prefers spending by the government, but that's just an illusion because taxpayers foot the government spending. These Wall Street executives are also spending money buying merchandise, hiring contractors, etc. Isn't that stimulating the economy?