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?

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.

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...

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.

BofA chief regrets taking government aid

CEO Ken Lewis now says it was a "tactical mistake" to ask the government for $20 billion to absorb Merrill Lynch because now Bank of America appears to be in the same crappy category as Citigroup.

I blame President "Doom & Gloom" Obama. He probably scared the wits out of Lewis. And now look at the consequence.

Maybe he can learn from U.S. Bancorp CEO Richard Davis instead, who tells the truth about TARP.

And the new N.Y. Senator is...

Albany is abuzz with Gov. Paterson's pick for New York's senate seat to replace now Secretary of State Hillary Clinton. Caroline Kennedy's out of the race. Democrats predict State A.G. Andrew Cuomo.

But looks like Paterson throws a curve ball -- it's Kirsten Gillibrand, considered by many to be a moderate Democrat. She's won elections with the backing of the National Rifle Association and opposition to TARP.

Democratic activists are already protesting the selection and planning to unseat her in the next election.

Latest auto bailout proves TARP is slush fund

President Bush, soon to leave office amid lowest approval ratings, seems to be unconcerned about leaving a bad taste in taxpayers' mouths and is ignoring signals sent from his party members in Congress. Why else would he approve a $17 billion rescue package for G.M. and Chrysler when the Senate killed its version of bailout? Has he lost faith in free market capitalism? And notice that Ford isn't among the list of beggars. Maybe G.M. and Chrysler ought to learn a few things from this competitor. The fact that Ford is doing just fine without government money proves that there is a glimmer of hope for the auto industry, even if it means America is left with just one car company.

The auto bailout will come out of the TARP fund originally set up to relieve "financial institutions." Hans Bader of OpenMarket.org gives us a good idea of the statute:

...The bailout statute defines “financial institutions” eligible for the bailout as ”any institution, including, but not limited to, any bank, savings association, credit union, security broker or dealer, or insurance company.” Never mind that Congress listed as examples of ”financial institutions” only entities that were banks, insurance companies, or financial institutions, not automakers.

Using this money to save a car company is clearly not the intent of this statute. What is Bush thinking? If he is interpreting the bailout bill to include any institution, then TARP is essentially a slush fund for the White House. That would make it unconstitutional. But if the bill is honored as-is, then the auto bailout is illegal.

Would there be lawsuits coming forth about this? Maybe that is what kept Ford away from this package.

And what will Obama's incoming administration do? Billions of dollars in spending money for the White House. I'm sure the lobbyists are already buzzing around for a piece of that diminishing pie.

Tax holiday instead of bailout

Thanks to Jeff Jacoby of The Boston Globe for shedding light in Rep. Louie Gohmert's (R-Texas) proposal: stop Treasury Pauson from spending the remaining TARP funds and use that money to finance a two-month tax holiday for every American taxpayer.

Is TARP constitutional?

The Trouble Asset Relief Program was passed by Congress and signed into law to thaw the credit crisis. At least that was its initial plan. But in reality the law gave much broader authority to the Treasury Secretary in using TARP funds, some hundreds of billions of dollars. In drafting the legislation, members of Congress met with Secretary Paulson and Chairman Bernanke to learn more about the problem. It was evident that either Paulson and Bernanke weren't able to adequately explain the situation, or lawmakers had no intention of fully understanding the crisis. The bill was passed within a few days, amid some lawmakers' admission of not really knowing what's going on, but "something had to be done."

George Will writes in Newsweek:

John Locke's "Second Treatise of Civil Government" (1609), which deeply influenced America's Founders, says: "The legislative cannot transfer the power of making laws to any other hands: for it being but a delegated power from the people, they who have it cannot pass it over to others." And: "The power of the legislative ... being only to make laws, and not to make legislators, the legislative can have no power to transfer their authority of making laws, and place it in other hands."

But that is essentially what TARP has done. It has made Treasury Department bureaucrats into legislators; or perhaps it has made Secretary Hank Paulson the fourth branch of government...

Our lawmakers sort of gave up on learning in detail about the crisis, and just lazily pressed for a vote on TARP. They threw up their arms and decided that letting the Treasury do all the work would be easier. And look at the situation now: more bailouts, more companies and municipalities asking for monetary aid, and more uncertainty from Paulson and Bernanke.

Paulson, Bernanke grilled in the Hill

The House Financial Services Committee plans to hear testimony from Treasury Secretary Paulson and Fed Chairman Bernanke today about their U-turn decision in using the $700 billion bailout money. Originally the money was for rescuing bad mortgage loans, but now Paulson wants to alleviate the pain in consumer debts. He's even taking his cause to the media with an op-ed in the NYT.

Congress gave Paulson overwhelming power with TARP (Troubled Asset Relief Program), but now it realizes that things aren't improving much, especially with the doomsday talk from Detroit automakers and stock markets continue to plunge. Lawmakers now want some answers as to how Paulson's new focus would help the economy.

I really don't think Paulson and Bernanke know what they are doing. Either the scale of the problem is beyond their control, or they are just incompetent. Whatever the reason, I think the only sure way we know will work is through capitalism without government interference. It's a bitter pill to swallow, but it'll help with the recovery. I'm afraid that the government's help isn't really helping and will only prolong the pain.