April 22, 2010

President Obama’s ‘TARP Forever’ Act

by Rep. John Boehner, House Republican Leader: We cannot restore confidence in our economy unless we fully address the root causes of the financial crisis and take definitive steps to ensure that taxpayers are never again forced to pick up the tab for bad bets on Wall Street. The legislation President Obama is promoting, however, does neither of these things and actually makes matters worse.

President Obama talks a big game when it comes to Wall Street, but his newest job-killing initiative would provide the nation’s largest financial firms with permanent bailouts ordered and overseen by unelected federal bureaucrats. Under his proposal, the largest Wall Street firms would become eligible for special treatment, including taxpayer-funded resources unavailable to smaller financial firms. These include exclusive access to a pre-existing bailout fund, a Treasury-backed line of credit and a government guarantee for any debt.

Such perks will benefit the likes of Goldman Sachs, President Obama’s top financial contributor during the 2008 campaign and a firm that just happens to be under investigation by the SEC for defrauding investors. The decision to designate Goldman and other giant banks as “too big to fail” won’t be made by taxpayers or their elected representatives. Under the Democrats’ plan, a new “Financial Stability Oversight Council” made up of unelected federal bureaucrats including representatives from the Treasury Department, the Federal Reserve, the CFTC, the FDIC and the SEC would have absolute power to seize any company and do whatever it wants with it.

That means Washington Democrats would force taxpayers to rely on the same government bureaucracies that were asleep at the switch the last time around. The commissioner of the SEC has warned that “there are no clear limits on the degree of government intervention that could be expected.”

This special treatment makes these large firms more attractive to investors than the smaller local banks, widening the gap between Wall Street and Main Street. Local banks will receive none of the perks of the Democrats’ permanent bailout bill while being forced to comply with all of its expensive, job-killing mandates at the worst possible time for small businesses across America.

Of course, the large banks won’t mind having their borrowing costs permanently lowered by government intervention. That is exactly how it was with Fannie Mae and Freddie Mac, the government mortgage companies that kicked off the crisis by giving high-risk loans to people who couldn’t afford them. Hoping to meet ambitious growth targets and reap considerable bonuses, Fannie and Freddie executives doubled down on their junk mortgage bet by investing heavily in the derivatives market, sparking a systemwide meltdown.

But don’t go looking through this 1,408-page bill that President Obama supports for any provisions that would reform Fannie and Freddie or get the derivatives market in order. This is unfortunate, but unsurprising: Washington Democrats have been enabling these government mortgage companies for years, giving them a free ride while the economy crumbled.

What’s worse, this legislation claims that it will fix derivatives, but in reality it will just end up sending this business overseas, hurting our economy and failing to fix the real problems. How can President Obama credibly argue that he has acted to prevent the next crisis when he won’t lift a finger to address the root causes of the last one?

Americans are right to be scared to death by the prospect of more open-ended bailouts for Wall Street. After all, our national debt ($12.7 trillion today) is on track to exceed the size of our entire economy (about $15 trillion) in just two years.

Permanent, unending bailouts for President Obama’s Wall Street allies and more job-killing mandates for Main Street is not reform. Republicans are standing with the American people by putting forward a responsible plan to end the bailouts, reform Fannie Mae and Freddie Mac, and hold Wall Street accountable for its actions.
John Boehner, R-Ohio, serves as minority leader in the House of Representatives.  The above article was furnished by GOP House Leaders Press Office and was published in Investor's Business Daily.

Tags: US House, John Boehner, financial bailout, TARP forever, Wall Street, socialism, government takeovers, H/T ARRA News Service.

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