Speaking near Albuquerque, New Mexico, at a town-hall meeting on Thursday, Pres. Obama said the federal debt load is unsustainableand warned of skyrocketing interest rates. He neglected to say that his massive spending-and-borrowing policies are directly causing this problem.
Now, I have a thought. Stop this massive spending and borrowing. It’s making George W. Bush, Lyndon Johnson, and FDR look like fiscal conservatives. We are borrowing 50 cents for every federal dollar we spend. And deficit spending combined with excess money-creation by the Fed is a surefire way to create slow recovery growth combined with higher inflation.
Perhaps this is why the stock rally has stalled. And raising taxes on entrepreneurs, investors, businesses, and the entire energy economy through cap-and-trade is no way to promote growth. Nor is unprecedented command-and-control intervention in the economy. In other words, a war on capital with an unlimited welfare safety net will do us in. Plus, Mr. Obama’s massive health-care expansion planswill end up bankrupting the entire nation.
This is his responsibility; he owns the problem now. When will he stop?
And speaking of command-and-control intervention, the public-interest group Judicial Watchsecured hundreds of pages of documents from the Treasury Department through the Freedom of Information Act which show how former Treasury man Henry Paulson crammed $750 billion in taxpayer money down the throats of our largest banks last October. Some of them didn’t even want it. But it was crammed down anyway.
In my view, the TARP capital injection did more harm than good. What unfroze credit markets was FDIC interbank loan guarantees, FDIC guarantees of long-term bond borrowing by banks, the guaranteeing of money-market funds by the FDIC, the Fed, and the Treasury, and of course the Fed’s own massive printing-press liquidity injections, which generated a steeply positive yield curve and large-scale money-supply growth.
TARP was originally supposed to rid banks of some of their toxic assets through a reverse — or Dutch — auction. But the subsequent Paulson decision to use the $750 billion TARP to purchase capital in the banks amounted to a duplicitous bait-and-switch. And that gave the government substantial control over bank compensation, dividends, repurchase agreements, and other operations that rode roughshod over investor-shareholders.
And it ain’t over yet. In today’s news, there’s more TARP coming for insurers — a particularly bad idea, as I wrote a month ago. Additionally, TARP may be used to backup the tax-exempt municipal-bond market and might even be used to help bailout the pension plan of America’s biggest trucker, YRC. And FDIC chair Sheila Bair told Bloomberg News that some bank CEOs will be replaced — despite shareholder votes to keep them.
So Paulson’s TARP has morphed into a command-and-control economic tool used by the Obama administration to exercise unpredicted intervention into the American economy.
Oh, and did I mention that the latest auto fix from Team Obama will blow off bondholder contract rights in the GM deal, just like Team Obama did with Chrysler?
And just think: We owe it all to TARP.
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