Taxes

Is the Responsibility Tax Legal?

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With a brain trust like this, what could possibly go wrong.

It didn't take long for the constitutional weaknesses in President Obama's proposed "Financial Crisis Responsibility Fee" to become clear. Eric Dash of Los Tiempos de Nueva York reports that a trade group is already setting up for an eventual constitutional challenge to the fee:

In an e-mail message sent last week to the heads of Wall Street legal departments, executives of the lobbying group, the Securities Industry and Financial Markets Association, wrote that a bank tax might be unconstitutional because it would unfairly single out and penalize big banks, said these officials, who did not want to be identified to preserve relationships with the group's members.

The message said the association had hired Carter G. Phillips of Sidley Austin, who has argued dozens of cases before the Supreme Court, to study whether a tax on one industry could be considered arbitrary and punitive, providing the basis for a constitutional challenge, they said.

It's hard to get a glimpse of the legal angle through Dash's exertions to refute SIFMA's claim. But it appears to be a challenge to the Responsibility Fee on something like bill of attainder grounds—that the law would be so narrowly tailored as to single out big banks for special punishment. As I noted the other day, there is also a due process problem: The targets of the fee are the largest banks, almost all of which have already paid off their TARP loans with interest and purchased their warrants from the Treasury Department. Add to this the limited scope and duration of TARP under the Emergency Economic Stabilization Act of 2008 and you've got pretty limited ground for building a new 10-year tax.

Dash wheels in familiar legal figurines to make irrelevant observations:

Outside legal scholars agree. "It seems to me that it is not even a close question," said Laurence H. Tribe, a constitutional law professor at Harvard who was a legal adviser to the Obama campaign. Mr. Tribe contends that imposing a fee or requirement to return a sum of money cannot be construed as a punishment. Even more important, the administration's proposal lays out a clear set of criteria, not a list of individual culprits, Mr. Tribe said.

If Tribe can name a precedent where a party that has already returned a sum of money is required to keep paying because another party is still in debt, he should do so. This kind of sloppy thinking tells you that the point of the Responsibility Fee is not to protect taxpayers or ensure square dealing but to make some easy politics out of some (justly) unpopular banks.

NEXT: Yéle Haiti: Ready Or Not?

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  1. Why don’t these guys quit playing and just say it. If your bonus is bigger than an Obama book deal it belongs to the government.

    Same same if it is smaller.

    1. Has anyone else smelt a massive cloud of Orwellian DoubleSpeak here? A “Responsibility” Tax? Hahahahahahahahahahahaha! Oh, hohohohohahahahahahaha!

      Oh damn, I think I just wet myself….

  2. Zero chance this happens.

    1) The whole point of TARP was to prop up balance sheets so reserves would meet Federal requirements. So, if the Fed taxes them …

    2) Why do we think that the banks, who weaseled $700M in TARP funds plus Gawd knows what else, won’t be able to make this go away like Chris Dodd, once he ceased to be useful?

    3) How does the President get to just declare shit like this? Forget bill of attainder constitutionality issues, how does he unilaterally get to grab property without any kind of law being passed first? Isn’t that a horrible precedent, no matter what party you belong to?

    1. You left out the banks forced to take the money, paid back already or not.

      1. How were they forced? I don’t remember any reports of Hank Paulson pulling out a gun and putting it to their heads?

        Or do you mean that the banks were afraid that if they did not take the money then their cozy relationship with the FED and Treasury would end and they would not be getting all those low interest loans and special drawing rights and special rules?

        Or in other words the banks were afraid that they might be treated like normal businesses and people and not the insiders and crony capitalists that they are.

        1. You don’t seem to understand how much discretionary power bank regulators have. If Wells Fargo had refused the bailout money their regulator could have screwed them nine ways till Sunday, all within the law.

        2. DJF, you are a fool. Of course some were forced to take it. They were told outright that they would be penalized if they didn’t. You need to stop drinking the Obama Kool-Aid.

        3. Some banks were forced to take the money so banks that needed it wouldn’t be found out and have their reputations harmed. Of course everyone found out who needed it and who didn’t but the fact remains, some banks were forced to take bailout money and surprise surprise, they paid it bank quickly…you know, since they didn’t need it in the first place.

          1. I remember reading that when the government had the meeting with the heads of the banks they (the feds) made it quite clear that they (the bank heads) would be arrested if they (the bank heads) did not sign the papers accepting the TARP money.

            1. No, the regulators made it clear the banks would not be found in compliance with some sort of regulation and would be shut down.

        4. It’s call exhortation DJF. The other commenters understand how the government had the banks over a barrel. Here’e more for ya.
          http://logisticsmonster.com/20…..obama-yet/

    2. Isn’t that a horrible precedent, no matter what party you belong to?

      No, if you belong to either of The Big Two parties it’s a great precedent. It means you can actually just go do whatever the fuck you want. Which is what free countries are supposed to be all about.

      Just look at ObamaCare, and the ObamaCarbonTax that is sure to follow. Plus whatever the Republicans decide to do once they get back in power.

      I’m afraid you’re missing the whole point….

      1. Yes, let’s look at Obamacare.

        http://www.newsweek.com/id/228630/page/2

        I mean, you might have to pay a few bucks more for insurance, because…duh duh duh…it will be a better product. No more being dropped when you are sick. No more lifetime max.

        Frankly, I don’t think many teabaggers even know what is in the bill. The few that I personally know sure don’t, and even claim that its all some secret that the Democrats won’t let them in on (even though it takes five seconds to find things like the Newsweek article). That implies that my teabag friends didn’t even try to look. In other words, deliberate ignorance.

        1. “No more being dropped when you are sick.”

          But you will be rationed out if the government judges you “not cost effective” without recourse to your own resources.

        2. Chad, we all know you don’t have any “friends”.

          “Deliberate Ignorance”? Projection is the word to describe your post here.

          You really are the worst sort of thief, aren’t you? If you think you have “paid your share” then you favor taking anything you can get from your neighbors, all because you “care”.

          Chad, you need to take up “Universal Fire Insurance”. If someone’s house burns down and they don’t have insurance, their “rights” have been denied? It would be “fair” (in the assbackward Choad world) if fire insurance companies were not able to deny you coverage just because you have a “pre-existing condition” ie a previous fire.

          Admit it. Your “education” came from cereal boxes.

          1. Go for the gold, Chad. Go for Universal Food, Water, and Air Care. Why stop at health care when so many other things are so much more necessary to live? We could just get daily packages of food, water, and air from the government, all financed by those who advocate it.

            Btw, I don’t have health insurance, Chad. Will you buy mine? You do care about me, don’t you?

            1. Universal Flying Cars for Everyone!

            2. Soonerliberty,”Btw, I don’t have health insurance, Chad. Will you buy mine? You do care about me, don’t you?”
              We already have paid for your insurance but you don’t seem to understand it because you have yet to make a claim on it. What do you think happens when you show up to the emergency room without any healthcare? Chad, Soonerliberty needs to send you a thank-you card for bailing his ass out when the odds run out.

              1. Well, I haven’t been to an emergency room yet, but I was once in a mental hospital for entertaining and even promoting the ideas of liberal progressivism. I never would’ve had an incentive to leave had they not cured me. So, thank you, Chad, for healing me via your voluntary contribution to society! I am eternally grateful.

                Sounds unfair to make everyone else pay for me . . . hmm, that seems to have been my point, bwahahaha.

              2. there are so many assumptions in this, i won’t bother to point them out. one thing is perfectly clear though, you’re a goddamn fool…

                1. – (re: the drivel from put up or shut…)

                  1. ransom147,I triple dog dare you.

                2. Here, I’ll try….

                  We already have paid for your insurance but you don’t seem to understand it because you have yet to make a claim on it.

                  In other words, you are a thief whether you like it or not. Just because you haven’t taken anything yet means nothing.

                  Recently when I had an accident, and cut myself rather badly (and had no insurance), I had several liberal friends encourage me to go to the hospital and use a false name to get “free” healthcare. I replied that I couldn’t, and they asked why, and I replied “Because I’m not a thief.”….the looks I got from them were priceless, and I beat a hasty retreat shortly thereafter.

                  1. oaktownadam,”and had no insurance”. What is it with libertarianism and the lack of health insurance? Great that you have the courage of your convictions (because most libertarians seem not to) but you could have been transported If you were unconscious and not been able to refuse treatment.

                    1. put up or shut up

                      The return of “rather crazy that Libertarian” or RCTL or the real RCTL or whatever it is calling itself now.

              3. @put up or shut up

                “We already have paid for your insurance but you don’t seem to understand it because you have yet to make a claim on it. What do you think happens when you show up to the emergency room without any healthcare?”

                First – if Soonerliberty shows up at the emergency room WITH healthcare, he/she is an idiot because you wouldn’t need the emergency room.

                Second – if she/he shows up at the emergency room without health INSURANCE, he/she might be paying out of pocket.

                I do agree with you that we all pay for those that don’t have insurance and don’t pay by other means. But is that a good enough reason to take away the right of individual to make the choice to pay out of pocket instead of being forced by the federal government to purchase insurance?

                1. bleek obummer, “First – if Soonerliberty shows up at the emergency room WITH healthcare, he/she is an idiot because you wouldn’t need the emergency room.” Get your hand off of your dick when you type. You don’t make any sense. Healthcare policy and insurance are the same thing. He most likely will not be able to pay a bill because he cannot even afford insurance. Yes, he should have to avail himself of a catastrophic policy.
                  ….Yes

                  1. @put up or shut up

                    You’re the one who said “What do you think happens when you show up to the emergency room without any healthcare?” dickbreath.

                    Healthcare policy and insurance are not the same you fucking moron. Heathcare is getting you well and insurance is paying for it.

                    If you weren’t so busy with that cock in your throat, you’d understand.

                    1. bleek obummer,”dickbreath,fucking moron,cock in your throat,you’d understand.” I understand all right. Hell has no fury like a little boy.

                    2. RCTL

                      It was the only I could get you to admit that you are really put up or shut up – and it worked!

                      Trying to keep my trolls straight.

                    3. The only way (by the way).

                    4. “The only way (by the way).” Preview baby preview!
                      “It was the only I could get you to admit that you are really put up or shut up – and it worked!” Are we playing a new game? I can’t tell you how many times you have responded to me on a thread.

                    5. RCTL/put up or shut up

                      Inhale my member!

                    6. Trolling is my business and business is good!

                    7. RCTL 2.0, are you determined to be a bad boy?

                    8. What is RCTL 2.0?

                    9. A real bad boy.

                    10. RCTL – inhale my member bitch!

                    11. RCTL

                      Or maybe ReCTaL injection?

            3. We already have universal food, water, and air, you twit.

              1. We’re talking about universal food, water, and air doled out by the welfare trough system, something you no doubt would love to have in place.

        3. “Frankly, I don’t think many teabaggers even know what is in the bill.”
          The folks in Congress voting on this Frankenstein’s monster don’t know what’s in it either. This legislation is bigger than Gone With The Wind, and it’s unlikely any of them have read it. The mass of unintended consequences will keep Congress busy for years with perpetual legislation just to clean up the mess.

          1. But somehow Newsweek does?

        4. Jesus, Chad. WTF is wrong with you? This is a banking thread. Grow the fuck up.

          1. Surprisingly, he didn’t whine about global warming in this thread about bank regulation.

            Not yet, I should say.

          2. To be fair, Chad was responding to Ebeneezer Scrooge who bought it up first. Chad plenty dickish enough, without laying this on him.

            1. True, but health care still doesn’t belong in this thread… and, you’re right, Chad is still a dick

        5. I mean, you might have to pay a few bucks more for insurance, because…duh duh duh…it will be a better product.

          Insurance will be more expensive? So you want less poor people to be able to afford it?

        6. I know the Eshoo amendment is in it, and that’s enough reason to hate it right there.

      2. Right. Instead, it is a horrible precident fr the American people

  3. If the big banks do not like this tax, they can simply divest their assets below the $50 billion mark…or hide them.

  4. “…wrote that a bank tax might be unconstitutional because it would unfairly single out and penalize big banks,…”

    If targeting “bigness” is unconstitutional, how does that not apply to progressive taxes like the current income tax structure and the estate tax? I am not arguing that they are wrong, but from what precedent are they operating from?

    1. Or how about taxes in general for unfairly singling out the American taxpayer?

    2. Thinking exactly the same thing. I just don’t know. I think the heart of the matter is whether this is a “tax” for revenue enhancement or “punishment”. If it is punishment, I think that you cannot single out groups for punishment (on the logic that maybe most people in the group are guilty) where certain people in the group are not guilty (this tax would hit Hudson Bank, they never took TARP). But taxes certainly do single out groups – that is the progressive tax structure (as you note).

      1. It’s for punishment. Cutting taxes would actually be more beneficial.

  5. Obama’s justifications for this tax are dishonest. The tax has nothing to do with outstanding TARP funds. Banks that have already paid those funds back have paid them back, and those that have not will still owe them, all this does is impose greater costs that will make it harder to pay off their TARP debt. Complaining about bonuses is petty and irrelevent to whether a tax is justified.

    1. The banks are clearly a convenient scapegoat, a whipping boy. Not that they are innocent of poor judgment, greed, recklessness…who is? Congress?

    2. populism 101

  6. If Tribe can name a precedent where a party that has already returned a sum of money is required to keep paying because another party is still in debt, he should do so.

    That’s not why they are being required to pay. It’s because they are “too big to fail”. This “tax” is a form of insurance, which these banks clearly recieve the benefits from.

    And if you think these guys aren’t hauling it in hand over fist on your tax dollar, you aren’t paying attention. How on earth could anyone NOT have made billions last year if you could have borrowed essentially limitless free money from your rich uncle, and speculated it at well. My dead dog could have gotten a 30% return simply by blindly aiming in the general direction of the market. How big should his bonus have then been? Throw in the insurance factor, and these guys are probably not even generating any profits….just milking the government teat. I am surprised any libertarian is defending this. Oh I am not…you just would have let the entire system collapse into fiery ruins.

    1. Except TARP was not an insurance policy and the banks that could pay the money back with interest have. The category “too big to fail” is one big government lovers have created out of their own minds.

      1. To me, “Too Big to Fail” means they really, really need to fail, and in a hurry. The opportunity cost of keeping them around is a giant drain on our economy.

    2. If this “tax” is a type of insurance, wouldn’t it be better handled by the FDIC in increased fees?

      Don’t you find it odd that the government is going to tax these banks for being too big, when it was government policies that allowed, or facilitated these banks to become so big in the first place? How about just eliminating those policies? What about Federal Reserve policies and Maiden Lane?

      1. Don’t you find it odd that the government is going to tax these banks for being too big, when it was government policies that allowed, or facilitated these banks to become so big in the first place?

        I find it many things. I only wish that odd were one of them.

    3. I really don’t understand why Reasonoids are going to bat for the big banks on this one. This is a moral hazard tax, plain and simple.

      Very large financial institutions create systemic risk. When they reach the point of default, this creates large negative externalities across the financial system as a whole, possibly stretching out into the larger economy. The threat that these firms pose leads the government to come in and prop them up in a crisis, as was done with TARP. (Saying that the government should have let them fail is more or less irrelevant right now. The fact is that they were rescued, and that the government cannot plausibly claim right now that it won’t undertake further rescues in the future.) The knowledge that the government is willing to intervene creates moral hazard across the financial system as a whole. (Goldman Sachs, for instance, may not have “needed” the money that they were given directly by TARP, but they benefited from the interventions as much as any other firm, so it’s ridiculous to think of them as innocent bystanders suffering under the government yoke.) The purpose of this tax is a) to tax away the financial industry’s gains from moral hazard, which after all come out of our pockets; and b) to discourage the creation of financial megafirms in the first place, thus reducing overall systemic risk.

      Do Reason readers get any of this analysis? No. They get a sob story about the poor banks being victimized by big bad Obama. Don’t believe the bollocks. In a world where the moral hazard created by government interventions exists, this is probably the best path to follow.

      1. From Greg Mankiw at http://gregmankiw.blogspot.com…..-tax.html:

        “What to do? We could promise never to bail out financial institutions again. Yet nobody would ever believe us. And when the next financial crisis hits, our past promises would not deter us from doing what seemed expedient at the time.

        Alternatively, we can offset the effects of the subsidy with a tax. If well written, the new tax law would counteract the effects of the implicit subsidies from expected future bailouts.

        Will the tax law in fact be so well written? It certainly won’t be perfect. But it is possible that it will be better than doing nothing at all, watching the finance industry expand excessively, and waiting for the next financial crisis and taxpayer bailout.”

        I know libertarians hate taxes, so don’t think of it as a tax! Think of it as a counter-subsidy.

      2. From Greg Mankiw:

        “What to do? We could promise never to bail out financial institutions again. Yet nobody would ever believe us. And when the next financial crisis hits, our past promises would not deter us from doing what seemed expedient at the time.

        Alternatively, we can offset the effects of the subsidy with a tax. If well written, the new tax law would counteract the effects of the implicit subsidies from expected future bailouts.

        Will the tax law in fact be so well written? It certainly won’t be perfect. But it is possible that it will be better than doing nothing at all, watching the finance industry expand excessively, and waiting for the next financial crisis and taxpayer bailout.”

        I know libertarians hate taxes, so don’t think of it as a tax! Think of it as a counter-subsidy.

        1. This is a moral hazard tax, plain and simple.

          Says you. If that’s what it is, why don’t they say that’s what it is? “From now on, we will bail out banks if they have over $X billion in assets. In return, they have to pay Y% of assets per year. This money will be set aside in a special fund and definitely not spent on anything else. Any banks below $X billion in assets are on their own.” Something analogous to deposit insurance. [But why set a threshold at all? $X billion poses a systemic risk, but $X billion – $1 does not?]

          But if the purpose of the tax is actually what they’re saying the purpose of the tax is, then the fact that you (or Greg Mankiw) can come up with a post hoc rationalization for a tax doesn’t justify it.

          So I think you need to argue that (1) the purpose of the tax is what you say it is, but (2) coming out and saying that’s the purpose of the tax would somehow defeat the purpose of the tax, so they have to noble-lie about it.

      3. Sure, and if the government would simply instigate some “Five Year Plans” then everything would be roses?!

        You have absolutely zero knowledge of history and economics, obviously. Read Thomas Sowell’s The Vision of the Annointed: Self-congratulation as the basis for social policy or Knowledge and Decisions. Of course, you have to be able to be honest with yourself, which is why I didn’t suggest it to Choad.

      4. Your problem is you believe the “too big to fail” lie. No bank (or country, for that matter) is too big to fail. Just let the failures fail.

      5. but it’s…TEH SLAVERY!!!

        I would like to offer the the following link to show how wrong (and how right) comparisons to communism are to current events. It’s the new Godwin and it might help if people had a fucking clue rather than listening to Glen Beck and having skimmed “Das Kapital” 10 years ago

        http://www.departments.bucknel…..77toc.html

      6. Banks bigger than 50B can go out of business without creating systemic problems. See e.g. CIT, went under a couple months ago.

      7. You do not undertsand that being against bad tax policy based on flimsy and dishonest rationales is not the same as “going to bat for the banks”?

      8. Goldman Sachs, for instance, may not have “needed” the money that they were given directly by TARP

        Of course they didn’t need the money, as they were betting against the very crap they were peddling. How this is not considered outright fraud is beyond me.

        Imagine if Ford was caught hedging against its 2010 model year cars being lemons. The uproar would destroy them and people would be put in prison. Yet Goldman is so arcane to the average Joe, they get away with the same thing.

        Now they are making billions by borrowing money from the government for almost nothing, and then selling it back to the government for interest. What a joke.

    4. Wow, you are really just full of bullshit. If it really was insurance, like FDIC, then it has to be managed in a separate fund. But the money is going into the general fund and will be used. And even if it was a separate fund, it would still be wrong ? the way to solve a too big to fail problem is not to insure the risky behavior of those institutions, that guarantees that such behavior will reoccur (and if it does, do you think that the amount of this tax would be sufficient to cover the damage).

      On your second point regarding borrowing at zero at the Fed window, you are 100% right. But the solution to that isn’t to tax them (which they will simply pass on to consumers), it is to get the Fed to stop keeping interest rates artificially low (with your Messiah’s full support, I might add)

    5. I didn’t know that bankruptcy caused fires. I also didn’t think statists would defend rich people socialism, allowing big business to socialize their risks. Amazing! Chad does like big businesses after all. Under his system, we give money to big businesses from the taxpayer to save them after having induced them to take massive risks they wouldn’t have otherwise taken, then we tax the money we gave them. The logic of these people is actually impressively lacking, but it’s typical of those who fail to remember that any money the government has has been taken from the private market first, thus destroying all possible alternatives. It’s people like him that can’t see the sickness of using taxes to pay gov’t employees and then retaxing the already taxed money. Voila, double taxation! How you like them apples . . . oh, and if you don’t like it, well, you’re stupid. Too big to fail? How bout just too big?

      1. We know he likes big business, he is an eminent domain for any reason whatsover shill too.

        Chad lives in the pocket of big business. he realizes that big business == big government.

        1. How about an eminent domain claim to knock down an abortion clinic serving minorities only or a quality affordable housing district otherwise known as a ghetto? Or what about a recycling plant? I’d be interested in what a statist would replace his crown jewels with. After all, his plans are superior to the plans of the brilliant, planning planners didn’t know about his plan to plan planned plans by magnificently planning planners.

          1. I am pro-life, silly goose.

            And go ahead an eminant-domain anything you like, as long as it is done to the standards that I required. That includes my place.

    6. Sorry to hear about your dog. If it’s any comfort, be assured he is now in a much, much better place.

    7. I am taking your dead dog’s bonus.

      All of it.

      He doesn’t need it anymore.

  7. I agree with the above statement; the Constitution is inconvenient.

    1. Yep, it was supposed to be inconvenient to shit bags. No wonder the Lefturd hates it.

      1. “””No wonder the Lefturd hates it.”””

        The righturds hate it too. Just different parts for different reasons.

        I’m not surprised in the least that the US citzens is being taken for a ride. We are too focused on partisanship to realized we are all in the same car being driven off the cliff by both parties.

  8. I wish someone would take the lead and challenge the health bill on Constitutional grounds. That’s even worse than the so called “Responsibility Fee.” If they want the responsible parties to pay up they should start with Congress – current and past legislators. Past legisation and the pressure put on banks under the “fairness” doctrine caused the banks to become reckless in their lending practices. We see the same thing starting up again – both the legislative and the executive branches are pressuring banks to lend while few with good credit are even seeking loans. At the same time, they are brow beating these banks for taking those same risks and increasing both the cost of their lending and the potential for government interference with their contracts/debentures if they do lend. Congress has interefered with long standing bankruptcy laws and short-circuited an effective process in favor of their largest contributors and they have interefered with contract law as a sop to populist anger – anger they tried to use to their advantage that is soming back to bite them in the polls.

  9. Robin’ the “Hood” is about to meet Shylock demanding his pound of flesh.

  10. Seems perfectly reasonable to consider adjusting the FDIC deposit insurance fee so that it is progressive, rather than flat, to compensate for the “too big to fail” issue. Not a slam dunk, but reasonable people could discuss the merits.

    Unfortunately, the administration screwed up badly in discussing it as a separate tax, and discussing it separately from regulatory reform, which is really what we need. Just further gives the impression of a mindset to grab your money first, worry about the details later (a la ObamaCare).

    1. Regulatory reform is a codeword for putting a new program into place to fix the program that was put into place to repair the original program that didn’t work. Where does this madness end? Why does each planner think his plans will be better than the last planner? When will they realize that regulation is exactly what causes this kind of mess?

      1. Why does each planner think his plans will be better than the last planner?

        1) I’ve learned the lessons of history.
        2) Technology is better now.
        3) My plans are better.

        1. 4) I am an arrogant, delusional, sado-masochistic man that can’t deal with the burdens of liberty and craves order and power to fulfill my insatiable desire to return myself and everyone around me to the womb.

        2. You do realize it is only a matter of time before a very-centralized and planned economy is bigger than ours, right?

          But that is not what I nor anyone I know of around here is calling for, which is social democracy…a proven winner over our sorry state of affairs.

          1. “Proven winner”. What an arrogant assumption.

    2. There is no too big to fail issue.

  11. The Pres and Congress have taken an oath to protect and defend the Constitution, but they seem to violate it on a weekly basis. So “Wall Street” has to force the pols to honor their oath by going to court? Nice government you 56%ers have established here! But it won’t be this way for long.

  12. Unsurprisingly, the small businesses that are exempt from this tax have not complained. I wonder where they will stand when they come under attack for growing too big to fail.

  13. Didn’t GM and Chrysler, and GE for that matter, receive alot of that money. (And aren’t the car companies responsible for a good chunk of last year’s loss–AIG is the other half). Will they be hook too? If the government can classify them as banks for one thing, why not for the other too?

  14. “If Tribe can name a precedent where a party that has already returned a sum of money is required to keep paying because another party is still in debt, he should do so.”

    Yes and what about the fact that GM and Chrysler are not being required to pay back any TARP money? Of course they weren’t legally suppoesed to get any in the first place but that is another issue.

    And what about Fannie Mae and Freddie Mac? Not only are they NOT being required to pay anything, the government has committed to giving them an unlimited amount of additional subsidies indefinitely.

    1. Good points on GM and Fannie and Freddie.

      Not nearly enough attention is being paid to where the money going to Fannie and Freddie is ultimately ending up and what it’s being used for.

      I would really like to see a detailed analysis of that. Which banks are benefitting? What impact is it having on the housing market? Are they buying old, bad mortgages, or new loans, or both?

  15. Obama – the world’s greatest cynic – just playing to the cameras. Any “big bank tax” is to placate the plebes who won’t notice the increase in reserve interest payments.

  16. I would actually be all for this if it only applied to banks that took bailout money, but I have read that there may be some collateral damage involved based on the way it’s written.

    As far as the tax being illegal, I would say it’s no more legal than TARP was in the first place, so it’s just payback. I want to punish those banks and “banks” that took money, and the people who ran them. I want to run them into the ground. I want to strike fear into the hearts of any future businessman who considers stealing taxpayer money with the aid of Congress.

    1. What about those, like BB&T, that took the money against their will?

      Yes, they “voluntarily” took it, and paid it back the first time they were allowed to, but they were arm-twisted into taking it. It was made clear to them that they would be “run into the ground” if they refused. And now you want to “run them into the ground” anyway.

      1. I’m not sure I buy that. Granted the government wanted banks to take the money, in the hopes that the would lend it out, but if I recall correctly, some banks said they didn’t want or need the money only after the government suggested there might be strings attached to it. The government then backed off of that.

        1. http://www.istockanalyst.com/a…..d/2909545#

          Doesnt sound as strong as I made it out, but other articles I have seen suggest it was.

          1. http://logisticsmonster.com/20…..e-t-a-r-p/

            At the 7:20 mark starts Allison discussing BB&T taking the TARP money and he mkaes the coercion much more clear.

            1. I simply don’t believe them. No company rolls over for the government like that if they really don’t want to do something. At best they were cowards who should have put up some public token resistance.

                1. After Mr. Kovacevich voiced his concerns, Mr. Paulson described the deal starkly. He told the Wells Fargo chairman he could accept the government’s money or risk going without the infusion. If the company found it needed capital later and Mr. Kovacevich couldn’t raise money privately, Mr. Paulson promised the government wouldn’t be so generous the second time around.

                  So the best you can come up with is a token private request to not steal our money right then – but only on the condition that he could steal it later.

                  Yeah, Paulson totally held a gun to his head.

                  1. I guess you didnt watch the Allison piece I posted?

                    1. I’ve seen it before. Like I said, I don’t believe him/them. I’m not saying it would have been easy, but he just gave out without a fight – then claimed a fight later.

                    2. I agree that they didnt fight it all that hard. I know one of the banks tried to pay back the TARP money almost immediately after receiving it and was refused and threatened by the administration.

                      I think most of the fight was before it passed at all. As he mentioned, Allison was the only bank CEO who testified against it.

                    3. The story Im thinking of, which I cant find right now, is that when they brought some of the banks to the white house for a meeting to announce the new rules for those who received tarp money, one of the CEOs whipped out a check for the amount of their tarp debt and tried to pay it off on the spot. Obama wouldnt accept the check. And made it clear that that kind of attitude wasnt acceptable.

  17. You mean Obama is trampling on the Constitution?

    Damn. Who’da thunk that would happen.

  18. I am the Lizard King.

    I can do anything.

  19. BTW, did anyone hear the one-sided bit on NPR this morning about whether the individual mandate in Obamacare would be constitutional? They had one (one!) legal scholar arguing that it’s unconstitutional (Randy Barnett) followed by THREE arguing that it would be constitutional, including one guy (Mark Hall at Wake Forest) whose specialty is healthcare law and who said “everybody I know thinks it’s constitutional.”

    Lame.

    1. I stopped at NPR

      1. I stopped at Soonerliberty.

        1. Then how did you know I wrote “I stopped at”? Or perhaps you guessed that is what I would write.

          1. Soonerliberty, your job is not to question but to be toyed with.

            1. I thought that was the job of liberals who bend over to the gov’t and wait for the inevitable insertion…pick your end

        2. @put up or shut up

          You make just as much sense as you did as RCTL.

          1. bleek obummer, did you receive my fan club rejection letter? How are you ever going to qualify when you stay in your dorm room and type all day. I did find your post on DNA interesting.

            1. put up or shut up,RCTL,rather crazy that Libertarian,ReCTaL,Anus Dropus

              I received your letter – it was incomprehensible (like your posts here) so I recycled it. Maybe next time have one of the girls on your floor read your letter before you send it out.

  20. If well written, the new tax law would counteract the effects of the implicit subsidies from expected future bailouts.

    “If well written…”

    We’re talking about the Congress of the United States, aren’t we?

    1. If we think the effects of subsidies should be counteracted by a tax, why shouldn’t we just cut to the chase and skip the subsidy altogether?

      1. candlemaker’s petition? anyone?

    2. expected future bailouts.

      Dammit, they need to get better at lying to us. Is that too much to ask?

  21. Exactly, R C.

  22. At the time of the forced distribution of TARP funds, one of the major reasons (openly!) put forth was the need to conceal the identities of the weakest banks. Because you wouldn’t want investors or customers to know if a particular institution with which they were doing business was on the verge of going down the tubes.

    We must shield incompetent managements from the consequences of their bad bets. It’s the American way.

  23. I agree with robc; “too big to fail” is bullshit.

    We should have let the vultures have CitiBank (for example), and let them strip the best parts off, and leave the bones bleaching in the sun.

    1. The new chairman of BB&T mentioned that one of the effects of TARP was that it took some possible acquisitions off the table. BB&T was preparing to vulture some of the banks (or parts of the banks) but TARP prevented that.

  24. “If Tribe can name a precedent where a party that has already returned a sum of money is required to keep paying because another party is still in debt, he should do so.”

    Isn’t this any case with joint or joint and several liability?

    1. No.

      Joint and several liability arises when several parties agree to each be fully liable for a common debt. When the common debt is paid off, there is no liability.

      There is no such thing as a share of joint and several liability, if one party pays off a fraction of the debt, it isn’t released from liability for the remainder.

      1. While I agree with you, I don’t think it is far fetched to think that the lefty mind might say “you banks got us into this and forced us to extend this credit to you as an industry, and now the entire industry is liable for the debt”. You’re viewing it from an individualist’s perspective while a panel of judge’s may view it from a collectivist point of view.

        1. By RC’s explanation, I guess you could create a fiction that since all the banks took TARP funds they are collectively liable for the debt.

          But then, the banks that took the original TARP payout — the Naughty 19 we’re talking about with this tax — weren’t divvying up the entire $700 billion. That payout was the first half of TARP disbursement. All other things being equal, the standard TARP payout to a TBTF bank was $25 billion. And then the other half of the total was awarded in the Obama Admin. Citi and BoA may still have been sick enough then that they got some more money at that time, but for the most part the Naughty 19 were not involved in that next payout. So it’s a stretch to say they’re collectively on the hook for the TARP total — especially when nothing in the language of the law that created TARP indicated that they were creating a debt instrument like that. And I’d doubt whatever treaty JPMorgan Chase signed with the Treasury Dept. indicated that either.

          1. That’s a much better analysis than I would have come up with. But the Court has done some painful “stretching” in the past a la Wickard v. Filburn.

            1. I’m jaded.

  25. Hey, is the irony of the name of this blog intended, or is it an accident?

    1. Why is it ironic? Is the blog actually missing and standing?

      1. If Hit & Run is ironic, would the real name be Err & Stare? Miss & Idle? Unsuccessful Song & Not Declare One’s Candidacy?

  26. Well, I guess the fingers have to point somewhere right? Might as well.

    RT
    http://www.online-anonymity.se.tc

  27. Eric Dash of Los Tiempos de Nueva York reports[…]

    What’s with all this Spanish shit? You’re not even doing it right! If the rag is called The New York Times, the name implies the rag is called The Times and it belongs in New York. So the proper Spanish translation is “El Times de Nueva York.”

    I actually translate it as “Esa chingada mierda izquierdista” or “That fucked-up leftist shit”, but that is just me.

  28. What I find a bit puzzling is that large banks are generaly desirable because they *reduce* risk.

    A very small bank is at risk for the same reason that fewer clients and depositors, all in the same city or region, raise the chances that all of them will default (a local downturn) or try to withdraw at the same time. You WANT your bank to be large, so that it will have depositors in other cities or even countries, and thus won’t be seceptible to local fluctuations in the economy.

    In the 2008 crisis, obviously a lot of big banks participated in the mortgage crisis, but I don’t know if the SIZE of the bank was really a determining factor in that. It certainly helped to get them bailed out though.

    Perhaps there’s a countrvailing threat that even though a big bank will be less likely to fail due to the behavior of it’s customers, you’re more likely to lose if there’s a small number of banks, because of the greater risk that one or more of the banks will behave stupidly when there’s only a few of them. Causing problems for their clients.

    But on the other hand, the fact that ALL the big banks behaved similarly should be an indicator of what we know already – they were following the numbers, which were talling them that rationally, they should buy MBSes.

    The systemic risk didn’t come from the size of the banks so much as the fact that they were all drawing thier data from the same corrupted source.

    Even if you split the big banks up into smaller entities, it’s not clear that hundreds of little banks would not have done the exact same thing – given that the numbers were telling them MBSes were low-risk, high-return investments.

    1. Your analysis makes sense in a world without FDIC. FDIC, however, can swoop in on a failing small bank and have it taken over by someone larger over a weekend. Im not sure they could piece out BoA between 4 PM Friday and 9 AM Monday.

      So, while the risk of a bank failure is larger with small banks, the problem can be handled without a panic.

      Despite this, I still dont believe in “too big to fail”. Just “too big for FDIC to fix in a weekend”.

    2. What you don’t want is your bank to tied to the Federal Reserve or the FDIC. That is just good, sound, common sense.

  29. If Tribe can name a precedent where a party that has already returned a sum of money is required to keep paying because another party is still in debt,

    Ummm Child Support?

  30. Of Plundering and Men.

    (PEOPLE.com) — Nicolas Cage is determined to get his financial house in order and to pay the IRS all that he owes in back taxes.

    While the government recently placed a tax lien on his real-estate holdings, including an additional $6.7 million from 2008, “over the course of my career I have paid at least $70 million in taxes, unfortunately, due to a recent legal situation, another approximate $14 million is owed to the IRS,” Cage told PEOPLE in an exclusive statement.

    However, I am under new business management and am happy to say that I am current for 2009, all taxes will be paid including any to be determined state taxes.

    Cage will next be seen in the thriller “Season of the Witch” in March.

    What services did he get back from the gun-vermin-int that were worth $84 million USD?

    Next time, Nick, get your contract to stipulate to be paid in US Gold Eagles and then report your income sorely on the stamped value of the coins.

    1. What did he receive? A society which creates openings for mediocre actors to grab several hundred million dollars.

      1. What anyone makes is outside the “your damned business” zone, Chad.

  31. I love the clear messages being sent by Obama:

    1. The big banks are wholly responsible for the recession.

    2. People who took bad loans that they couldn’t afford are blameless.

    3. People should continue to make bad loans because the government is backing everything up with unlimited cash.

  32. Is it just me, or did Obama appoint the taxman from the Popeye movie to tax czar.

    Crap, I guess I have to pay the “mentioning of tax czar” tax.

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