“[T]here's no possibility to restore 8 million jobs lost in the Great Recession.” –Vice President Joe Biden, June 28, 2010
On June 25, 2010 at 5:30am, the House and Senate Democrat conferees voted to finalize legislation that would make Wall Street bailouts permanent and continue the destruction of private sector jobs. The bill would also grow the federal government at the expense of families and small business owners. As a result, the partnership between big government and Wall Street would be strengthened, as families and small business owners on Main Street continue to struggle with nearly 10 percent unemployment, record home repossessions and higher costs for loans and other credit products. In addition, while many small business owners are concerned about the lack of economic growth due to uncertainty regarding government policies and higher taxes, the Democrats continue to finance the on-going bailouts of Fannie Mae and Freddie Mac without any reform of the institutions. America’s families and small business owners are struggling to survive the consequences of misguided Democrat policies, and the Democrats keep adding to their burden.
BAILOUTS AND JOB KILLINGS PROVISIONS:
Makes Bailouts Permanent: The Democrat proposal authorizes the FDIC to access taxpayer funds and to determine how creditors of a failed firm would be paid. Additionally, the bill requires Congressional approval of FDIC and Treasury debt guarantee programs, and Treasury approval of the Fed’s use of its 13(3) emergency lending powers. Such approval processes allows the political class, legislators and bureaucrats, to use taxpayer funds and continue to determine the fate of politically connected Wall Street firms, rather than allowing failed firms to be resolved in a well established, apolitical bankruptcy process.
On-going Bailouts of Fannie and Freddie: To date, the taxpayers have lost approximately $145 billion bailing out Fannie Mae and Freddie Mac. Treasury Secretary Tim Geithner removed Fannie’s and Freddie’s $400 billion funding caps, turning Fannie and Freddie into government agencies and exposing the taxpayers to all of Fannie’s and Freddie’s liabilities. According to the CBO, the taxpayers’ liabilities are expected to be nearly $400 billion.
Increased Taxes: In January 2010, a Rasmussen Reports telephone survey found that 59 percent of voters nationwide believe cutting taxes is better than increasing government spending as a job-creation tool. Democrats, however, continue to ignore history and the wisdom of most Americans, choosing instead to increases taxes on financial institutions. The Democrat proposal would create a $19 billion slush fund to offset the cost of their proposal. Such tax increases would further discourage businesses from hiring, as well as raise the costs of the products produced and services provided. The CBO recently noted, “[T]he ultimate cost of a tax or fee is not necessarily borne by the entity that writes the check to the government. The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors...”
Increased Regulatory Burden: The Democrats’ proposal would create a new government bureau and empower bureaucrats to determine the types and terms of credit products. Additionally, the proposal would create a powerful new Office of Financial Research. The OFR would monitor, record, and report on any financial transaction, including any consumer transactions that it deems appropriate (and without consent of the consumer). The OFR would be funded by an assessment tax on financial firms. The OFR tax would also increase costs of credit products for families and small business owners, and add more layers of government red tape to an already overly burdened marketplace. These offices are certain to further the paralysis in job creation and economic growth.
Ties Up Capital: The use of derivatives encourages job creation and provides customized hedges to help businesses like farmers, grocery stores and energy companies manage price volatility, so that retail prices can remain low and stable. The Democrat proposal would authorize government regulators to arbitrarily impose capital and margin requirements for OTC derivatives, and impose new capital requirements for cleared swaps. Any additional capital and margin requirements imposed by the regulators could cost jobs, reduce investments, increase retail prices and make it less likely that corporations would be able to engage in responsible risk management.