A POPULIST WEDGE?…. The “Financial Crisis Responsibility Fee” proposed by President Obama is hardly a draconian cudgel, swung at irresponsible banks. It’s about repaying a debt to the public — as the president put it this week in a message to the industry, “We want our money back.”
There was some speculation this week about the politics: “[I]t does put Republicans in a box. It forces them to make a choice of siding with the banks or not. And who is going to want to argue that banks shouldn’t pay for their own bailout?”
About a nano-second after the White House unveiled the proposal, Republicans — the ones who hoped to position themselves as populist champions — immediately denounced the fee as outrageous, and swore to fight to protect those responsible for the crisis from bearing any burdens. Atrios noted that the fee is too modest, but added, “[P]olitics-wise, I’m struck by how little it takes to actually call Republicans on their ‘populist’ bluff.”
In a preview of an argument we’re likely to hear quite a bit of in the coming months, President Obama used his weekly address this morning to get the debate started in earnest.
The president laid the blame for much of the financial crisis where it belonged: “Much of the turmoil of this recession was caused by the irresponsibility of banks and financial institutions on Wall Street. These financial firms took huge, reckless risks in pursuit of short-term profits and soaring bonuses. They gambled with borrowed money, without enough oversight or regard for the consequences.”
Obama added that this made TARP a necessary evil, though it was his administration that made sure the cost of the program was cut and that most of the money was recovered. But that’s not good enough: “We want the taxpayers’ money back, and we’re going to collect every dime.”
The president went on to make his case, which should, at least in theory, put Republicans in a tougher position:
“That is why, this week, I proposed a new fee on major financial firms to compensate the American people for the extraordinary assistance they provided to the financial industry. And the fee would be in place until the American taxpayer is made whole. Only the largest financial firms with more than $50 billion in assets will be affected, not community banks. And the bigger the firm — and the more debt it holds — the larger the fee. Because we are not only going to recover our money and help close our deficits; we are going to attack some of the banking practices that led to the crisis.
“That’s important. The fact is, financial firms play an essential role in our economy. They provide capital and credit to families purchasing homes, students attending college, businesses looking to start up or expand. This is critical to our recovery. That is why our goal with this fee — and with the common-sense financial reforms we seek — is not to punish the financial industry. Our goal is to prevent the abuse and excess that nearly led to its collapse. Our goal is to promote fair dealings while punishing those who game the system; to encourage sustained growth while discouraging the speculative bubbles that inevitably burst. Ultimately, that is in the shared interest of the financial industry and the American people.
“Of course, I would like the banks to embrace this sense of mutual responsibility. So far, though, they have ferociously fought financial reform. The industry has even joined forces with the opposition party to launch a massive lobbying campaign against common-sense rules to protect consumers and prevent another crisis.
“Now, like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect. The very same firms reaping billions of dollars in profits, and reportedly handing out more money in bonuses and compensation than ever before in history, are now pleading poverty. It’s a sight to see.
“Those who oppose this fee say the banks can’t afford to pay back the American people without passing on the costs to their shareholders and customers. But that’s hard to believe when there are reports that Wall Street is going to hand out more money in bonuses and compensation just this year than the cost of this fee over the next ten years. If the big financial firms can afford massive bonuses, they can afford to pay back the American people.
“Those who oppose this fee have also had the audacity to suggest that it is somehow unfair. That because these firms have already returned what they borrowed directly, their obligation is fulfilled. But this willfully ignores the fact that the entire industry benefited not only from the bailout, but from the assistance extended to AIG and homeowners, and from the many unprecedented emergency actions taken by the Federal Reserve, the FDIC, and others to prevent a financial collapse. And it ignores a far greater unfairness: sticking the American taxpayer with the bill.
“That is unacceptable to me, and to the American people. We’re not going to let Wall Street take the money and run. We’re going to pass this fee into law. And I’m going to continue to work with Congress on common-sense financial reforms to protect people and the economy from the kind of costly and painful crisis we’ve just been through. Because after a very tough two years, after a crisis that has caused so much havoc, if there is one lesson that we can learn, it’s this: we cannot return to business as usual.”
I have a suggestion for the WH speechwriters working on the SOTU: “There are those who say we can’t possibly ask anything of the very financial institutions that brought us to the brink of collapse. But I’ve got news for them, too: Yes. We. Can.”