A little-noticed provision of President Obama’s proposed budget demonstrates his clear-cut decision to campaign on an anti-Wall Street platform, just a few years after receiving their largesse to win high office.
In his discussion of funding for the Department of the Treasury, Obama proposes:
The President’s Budget proposes a $61 billion Financial Crisis Responsibility Fee to be imposed on the largest financial firms in order to compensate the American people for the extraordinary assistance they provided to Wall Street, as well as to discourage excessive risk-taking. Many of the largest financial firms contributed to the financial crisis through the risks they took, and all of the largest firms benefited enormously from the extraordinary actions taken to stabilize the financial system. The Budget asks these firms to compensate Americans for benefits they received from these actions and to recoup TARP costs.
The fee will apparently be restricted to firms with over $50 billion in assets.
So what is the legal justification for this clear violation of the Constitution’s takings and bill of attainder clauses?
Obama contends that TARP allows for it:
The Administration’s Financial Crisis Responsibility Fee meets the statutory requirement contained in the TARP legislation that requires the President to propose a way for the financial sector to pay back taxpayers so that not one penny of the Government’s TARP-related debt is passed on to the next generation. It would extend beyond 2022 as necessary to achieve these ends, and to offset the cost of the President’s new, broad-based mortgage refinancing program which is designed to help homeowners who are still suffering as a result of the financial crisis. The structure of this fee would be consistent with principles agreed to by the G-20 Leaders and similar to fees proposed by other countries. This fee will reduce the deficit by $61 billion over the first 10 years.
Again, no mention of the Constitution here. It’s just a shoe-horning attempt – reading an unconstitutional notion into an unrelated provision. It’s not unconstitutional to ask firms that take payment to pay them back. But the vague way in which this is described suggests that Obama can simply extract cash from rich firms based on the vague idea that all of Wall Street benefitted from the bailouts. Worse, he’s using the cash to pursue the same sorts of programs that got us into this mess in the first place.
TARP was a rotten piece of legislation, and never should have passed; firms never should have been bailed out. But this is class warfare at its finest, lumping in victims with victimizers, all in the name of shutting down capitalism – i.e. “excessive risk-taking.” Even the name suggests how vindictive this provision is: the Financial Crisis Responsibility Fee. In truth, if anyone is going to pay that fee, it ought to the federal legislators and regulators who allowed the preconditions that led to the meltdown.