Does Obama want to control the banks?by Tim Manni
That’s the question some increasingly nervous market watchers are asking. Stuart Varney answers with an emphatic Yes:
I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn’t much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street’s black hole. So why no cheering as the cash comes back?
My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell ‘em what to do. Control. Direct. Command.
It is not for nothing that rage has been turned on those wicked financiers. The banks are at the core of the administration’s thrust: By managing the money, government can steer the whole economy even more firmly down the left fork in the road.
Varney, who has been an economic journalist for many years, offers this anecdote to back up his claim:
Fast forward to today, and that same bank is begging to give the [TARP] money back. The chairman offers to write a check, now, with interest. He’s been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with “adverse” consequences if its chairman persists. That’s politics talking, not economics.
Is Varney on to something? TARP’s original goal was to relieve banks of ‘toxic assets’ by buying them. Then the government revised the program by capitalizing the biggest banks by stuffing money into them to shore up their bottom line. This was done by buying preferred stock in those institutions, and according to some bankers, they were not given a choice:
While addressing colleagues last week at a forum for fellow executives, Bancorp CEO Richard Davis took the opportunity to blast the TARP program. Calling the initiative “troubled” and “lousy,” Davis backed up other executive grumblings that the money was more or less forced upon banks. While Davis said that was the case for his institution — “I will say this very bluntly: We were told to take it. Not asked, told ‘You will take it’” — a Bancorp spokesperson quickly refined the CEO’s statement saying Bancorp was forced to take the money for “competitive reasons.”
Why would the government want to nationalize (in all but name) the banking system? Varney sees a simple answer:
If Rick Wagoner can be fired and compact cars can be mandated, why can’t a bank with a vault full of TARP money be told where to lend? And since politics drives this administration, why can’t special loans and terms be offered to favored constituents, favored industries, or even favored regions?
In fact, banks are already told where to lend (via the anti-redlining provisions of the Community Reinvestment Act), and we’ve already seen at least one example of “special loans and terms” allegedly offered to favored constituents.
We’ll have to wait and see how this plays out.