The Wall Street Journal falsely suggested that the Obama administration is misleading the public on its rationale for proposing a fee on financial institutions, reporting that while the "stated reason" for the fee is "to recoup the cost of the financial sector bailout," Rep. Barney Frank (D-MA) "c[ame] clean on what this bank fee is all about" when he "essentially said the fee was a tax simply designed to raise revenue for the government spending." In fact, Frank stated that he supported the tax because the financial institutions "benefitted in a lot of ways" from various federal programs, and later added that the tax would go into the federal treasury, which collects funds for a variety of uses.
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WSJ falsely claims Frank "c[ame] clean" on Obama administration's real reason for bank fee
WSJ: "The numbers" don't support Obama's "stated reason" for proposed bank fee. In the January 14 Wall Street Journal article, headlined "Barney Frank Comes Clean on TARP Tax," Michael Corkery reported:
The numbers just don't add up. The Obama administration wants to raise about $90 billion in the next 10 years from an annual fee on the nation's 50 largest financial institutions. The stated reason: to recoup the cost of the financial sector bailout.
Yet, TARP banks owe the government only about $60 billion of the original $184 billion lent to them, according to the Treasury Department's latest figures as of Dec. 31. Many of the largest banks have paid back the Troubled Asset Relief Program funds, often with a profit to taxpayers.
So, where does that $90 billion target come from? J.P. Morgan Chase CEO James Dimon offered one idea during his testimony Wednesday before the Financial Crisis Inquiry Commission. Dimon said it felt like the banks which have already paid back taxpayers, were being asked to subsidize the bailout of General Motors and Chrysler.
Journal claims Frank "c[ame] clean on what this bank fee is all about" in CNBC interview. Corkery further reported:
That is where Rep. Barney Frank comes in. In an interview on CNBC this afternoon, Frank essentially said the fee was a tax simply designed to raise revenue for the government spending. Frank, who is in favor of Obama's proposed fee, said the money raised could be used to pay for the war in Afghanistan, repair bridges, fund programs like social security disability benefits or subsidize mortgage-modification programs.
Why are the banks being taxed for this? "It's entirely legitimate to make them pay for the damage [they] inflicted on the financial system,'' Frank said. "Getting money from these banks is a good way to expand government revenue without expanding the deficit."
Wall Street may not like Frank's answer. But finally, someone is coming clean on what this bank fee is all about.
Journal misleads over Frank's CNBC interview
Frank actually said he supported the fee because the banks "benefitted in a lot of ways" from federal intervention and "were a major factor in a terrible economic crisis." During a January 14 interview on CNBC's Street Signs, Erin Burnett discussed the fee and asked about financial institutions that have paid back the funds they received under the Troubled Asset Relief Program. Frank said of the banks, "They benefitted in a lot of ways. Yes, it wasn't simply a one-for-one deal here, where we lend you the money, and you pay it back. They benefited in ways beyond the original dollars. Look, these people engaged in irresponsible activity, overcompensated themselves for doing it, and were a major factor in a terrible economic crisis."
Frank reiterated that "in addition to the TARP [the banks] were the beneficiaries of a number of other things." Frank later stated: "I am in favor of doing it for this reason, because in addition to the TARP, they were beneficiaries of a number of other things, a liquidity deposit from the FDIC, a number of liquidity programs of the Federal Reserve, so I believe that from the overall standpoint of the taxpayers, it's legitimate to ask them to pay it back."
Responding to subsequent question about "where the money goes," Frank stated it would go to the federal treasury - which funds government operations - and would reduce the deficit by increasing revenues. From Burnett's interview with Frank:
BURNETT: What about this issue about where the money goes, though? And I just wanted to get your sense of this. And I know I'm simplifying it, but I think it makes it a point that's worth talking about today. We're calling it a modest proposal. I did the math, Chairman Frank. These 10 banks are going to pay $117 billion over 10 years, and there's -- there's just two simple options. Right?
One, they pay $1.2 billion to Washington every year, each of them. Two, they cut a check to every American taxpayer for $8 a year, or $83.57. It makes two points. One, it really isn't that much money. But, two, Washington, so much money going in, so many taxes going up, and people have this feeling of deficits keep going up, and we don't see the benefit of the money.
FRANK: You're making exactly -- you're making contradictory arguments. In the first place, how come it's not too much money when it comes in, but it's an enormous amount for them to pay back? They can't have it both ways. It can't be this terrible...
BURNETT: Well, they're not complaining about the amount. They're complaining about the principle, I think.
FRANK: Oh, I think they're also (inaudible). You mean, if we were only charging them 10 bucks they wouldn't be complaining? Of course they're complaining about the amount as well.
But beyond that, it is going to reduce the deficit. That's what you said, we have this terrible deficit. This money will be used to reduce the deficit.
By the way, part of the TARP cost...
BURNETT: Is that a promise, though? I mean, it's not going to somehow go to some entitlement program or some road somewhere?
FRANK: Well, it may -- no. Frankly -- look, what happens is the federal government has expenditures and it takes money in. Yes, some of it will go to pay for the war in Afghanistan, some of it will go to fix bridges that may be collapsing; some of it will go to one of those terrible entitlement programs. It may help to pay Social Security disability. That, by the way, Social Security disability, people who become disabled and can't work get Social Security more than is paid in.
So, yes, some federal revenue does go to help with Social Security disability. But the question is more of it is going to the military than should. But this money will go into the general treasury. And the deficit would be larger or it's possible we might not be able to fix as many bridges, et cetera.
By the way, there's one other category of spending that was a loss incurred by the TARP, and that's in mortgage efforts. And there it's entirely legitimate to make the banks pay because it was their practices, the banks and other financial institutions being irresponsible with mortgages that contributed to the problem. That's part of where the money will go.