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Snap analysis: Obama uses banks as foe, foil in election year
WASHINGTON |
WASHINGTON (Reuters) - President Barack Obama on Thursday proposed a multibillion-dollar fee on financial firms -- taking on a sector that has become a public foe and a political foil ahead of this year's midterm elections.
Obama, enraged by banks' "massive profits and obscene bonuses," intends to recover up to $117 billion from the fee to repay the cost of the bailout program known as TARP (Troubled Asset Relief Program).
Here's a look at possible results of the move -- both negative and positive:
* A populist victory. It's an election year and unemployment is in double digits. With majorities for Obama's Democrats in the U.S. House of Representatives and Senate at risk in November's poll, it's always nice to have an enemy to vanquish.
As a rough employment picture dominates the minds of many Americans, Obama's focus on bankers' bonuses is bound to earn him points.
With the proposed fee, Obama casts himself as leader who is acting on citizens' outrage over taxpayer money being used to bolster banks' bottom lines.
It also shows that despite the administration's commitment to reviving the sector to help the economy, Obama does not intend for taxpayers to foot the bill forever. That is likely to play well with an economically-harried electorate.
* A deficit plug. Political implications aside, Obama's fee would generate actual cash to cover the remaining costs of TARP and keep the deficit from exploding further.
That is likely to generate kudos from both Republicans and Democrats who are concerned about the ramifications of the U.S. debt load and budget deficit.
It also dovetails with Obama's goal of making deficit reduction a key priority in 2010.
* A potential backlash. A government-mandated fee on financial institutions is not without political risks. Banks could pass on the fees to their customers, extending the penalty to the taxpayers whom Obama was trying to protect.
* A failed foil. By focusing the White House's message machine on a battle against banks, critics may see an attempt to change the subject from other perceived failures of the president's one-year administration on the economy and in foreign policy.
Even if the fee achieves its goals, collecting that money will not be the key to creating jobs and turning the U.S. economy around for good.
(Editing by Vicki Allen)
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We already assume that will be the case and many will be on the alert for it. The market will do its job: banks with the lowest fees will get more customers
This is about RISK MANAGEMENT and the 50 biggest Investment Banks represent a significant risk to the American Economy and US Tax payer. How big, well so far their irresponsibility an negligence has left us in a $4 TRILLION (and counting) storm that they created. There should be consequences to being negligent and causing financial and harm to others. So far the only consequences to the banks have been huge bonus’s. The $117 Billion is a nice start, but small drop in the bucket. We should make them pay for a $4-$5 Trillion default insurance policy so in 60 years when they do this again (and they will) at least part our RISK will be covered. This is the banks game, it time the public started playing the same game.
plus, it’s a little too late to take on the banks. they’ve already used our tax dollars to go to spa and bonus themselves and pay off all their fellow bankers!
obama should have nationalized the banks in his first two weeks in office. fired the ceos and boards and replaced them with a team of serious academic economists headed up by krugman and reich.
by now, the banks would have been lending (to ordinary citizens) and have lowered their fees. or, better yet, the new national banks could have been reorganized as non-profit quasi-government corporations.
that’s how you take on the banks!
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