- The Washington Times - Monday, January 25, 2010

ANALYSIS/OPINION:

President Obama has decided to take on the banking industry with the most intrusive regulatory and tax package since the New Deal of the 1930s. If the president’s failed freshman year didn’t convince the O Force of his own fallibility, confronting Wall Street should bring him back down to Earth.

Mr. Obama wants to tax banks to make them pay for the bailouts. The scheme apparently was hatched to distract Massachusetts voters from thinking about his party’s health care fiasco and to give Democrats a populist wedge to use against Republicans. The ploy failed, largely because Americans are wary of increased government intervention into the economy as the recession deepens following last year’s blitzkrieg of federal action. It’s transparent that the Obama administration is targeting Wall Street because it needs a new scapegoat. Now that the president is entering his sophomore year in the White House, he can no longer get away with blaming his predecessor, George W. Bush, for all the nation’s ills.

Banks are not the bad actors Democrats want people to believe. Banks have paid back almost all the money they were lent along with interest. The same cannot be said for government-run Fannie Mae and Freddie Mac, which have irretrievably lost $400 billion and counting - and the Obama administration is offering those losers a blank check for billions more. The same laxity applies to Government Motors and Chrysler, which aren’t close to paying off the nearly $100 billion handout they received courtesy of taxpayers. Outside the political motives to demonize bankers, there’s no reasonable public policy justification for why banks should be singled out for a new extra tax.

The truth is most of the blame for the financial meltdown belongs to government. Some banks were forced to take government bailout funds under government threat. Others, such as Bank of America, found themselves in financial difficulty because the government forced them to merge with other institutions that had lost oodles of money. Each situation is unique; if there is going to be a bank tax, it makes no sense to tax the disparate institutions equally. Even under Mr. Obama’s own anti-business logic - that new taxes and regulations are needed to control risk in the banking sector - it would only make sense to impose a tax on riskier banks. Levying an across-the-board tax will only increase costs for all banks and raise prices for customers.

Even Obama booster Warren Buffett is unable to defend the administration’s proposal. “I don’t see any reason why they should be paying a special tax,” the billionaire said of the banks. “Look at the damage Fannie and Freddie caused, and they were run by the Congress. Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so.”

Pitchfork populism doesn’t have a successful track record at the presidential level. William Jennings Bryan died in 1925 after three unsuccessful runs for the presidency during which demonization of Wall Street was central to his message. Democrats might believe that their false populism will distract voters from the mess in Washington, but, as Mr. Buffett said, “trying to punish people” doesn’t make a lot of economic sense.

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