Heritage Foundation
After suffering major electoral and legislative defeats last month, President Barack Obama took to the campaign trail in Nashua, New Hampshire, pitching his administration's latest new plan to lower our nation's double digit unemployment rate. This time, the President hopes to do for small businesses what Fannie Mae and Freddie Mac did for home mortgages. Specifically, he wants to create a new $30 billion "Small Business Lending Fund" which will loan money to banks with assets under $10 billion at favorable new rates, as long as they comply with a slew of new regulations designed to incentivize them to loan that money to small businesses. Never mind that a recent poll of small business owners by the National Federation of Independent Businesses ranked "Finance and Interest Rates" as the second to last most important problem facing their business.
And just where does the President plan to get this new $30 billion? The President explained yesterday: "This proposal takes the money that was repaid by Wall Street banks to provide capital for community banks on Main Street." In other words, TARP - the $700 billion Troubled Asset Relief Program first signed into law by President George Bush, and then used by Treasury Secretary Hank Paulson to force many financial firms into taking taxpayer money they never wanted in the first place. But if Wall Street banks are paying-back their TARP funds, then how can President Obama say the following when justifying his Financial Crisis Responsibility Fee:
We want our money back, and we're going to get it. And that's why I'm proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers. Now, our estimate is that the TARP program will end up costing taxpayers around $117 billion -- obviously a lot less than the $700 billion that people had feared, but still a lot of money
So which is it? Are Wall Street banks repaying their TARP obligations in full so that the President can afford to spend $30 billion on his new Small Business Lending Fund? Or is TARP going to lose $117 billion? The answer is both. In reality, the major financial firms that took TARP money - many against their will - are paying-back those funds, and American taxpayers will get every single dime they are owed. But TARP has long since devolved from a one-time emergency action into a crony-capitalist political slush fund. TARP will lose money. But those losses will come almost entirely from the bailouts of union-backed firms General Motors and Chrysler, as well as AIG. Of course, GM and Chrysler are exempted from President Obama's Crisis Tax, as are the government firms at the core of the housing bubble - Fannie Mae and Freddie Mac. The President's Crisis Tax has nothing to do with recovering unpaid taxpayer TARP money and everything to do with finding a new source of revenue to help cover up the Obama administration's massive new spending increases.
And unfortunately, more government spending and more government regulation are this administration's answer to every economic problem. But more debt and more regulation will not create new jobs. According to a new Gallup poll, 57% of Americans are worried that there will be too much government regulation of business, half say the government should become less involved in regulating and controlling business, and only 24% say the government should become more involved in regulating and controlling business, which is exactly what the President's new "Small Business Lending Fund" does. And remember that NFIB poll that showed borrowing costs as the next to last problem small businesses face? Well, that same poll also identified taxes as their second biggest problem and government regulation and red tape as the third. Americans and America's small businesses know what will create new jobs, and it ain't taxpayer campaign giveaways from the White House.
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