The Shakedown

I don’t know what else to call it.  Last week’s “settlement” with the five biggest banks in the country, where the Obama Administration squeezed $25 billion to settle “claims” of “inappropriate” lending practices that resulted in 2008’s Financial Crisis, was nothing more than a shakedown.  The settlement suggests that there were no other parties involved in the creation of our most recent recession (assuming we are in economic recovery).  It did not go after the other responsible parties, namely, the people who took out mortgages they couldn’t afford, the people who packaged these loans into securities and sold them for huge fees, the people who bought the securities and ended up holding the bag, and the government that forced the banks to make substandard loans in the first place.  But this President has invested the last four years screaming about greedy Wall Street and the “failed policies that got us into this mess” and someone had to pay.  Willie Sutton would be proud.  He understood that you robbed banks “because that’s where the money is”.  President Obama understands this.  Hence, the shakedown, Chicago-style.

If you’ve read any of my pieces from the last four years, you understand that I’ve always been concerned about President Obama’s motives.  He has spent very little time governing since taking office, and a lot of time campaigning for re-election.  His handling of our economy can only be described as bumbling, incompetent.  I used to think it was on purpose; that his rhetoric was designed to appeal to his populist base, and to a certain extent it is.  But I’ve slowly come to realize that the President is clueless.

My evidence for this realization is the budget that the White House submitted to Congress yesterday.   When I do my budget at home, I look at revenues and expenses, and if my expenses exceed my revenues, I either cut my expenses or seek to grow my revenues, or a combination of both.

But not this Administration.  For the third year in a row, they submitted a budget to Congress that cuts virtually nothing, raises revenues on the wealthy, and the discrepancy is so huge ($1 trillion, with a “t”) that it cannot be reconciled.  And this is the third year in a row!  The President is already blaming the Republicans in the House, and “the failed policies that got us into this mess”.  It’s as if he has no say in the matter.  He’s not responsible.  He’s irresponsible.

The Administration cannot possibly be looking at the situation in Europe and learning from it.  So, here it is, plain and simple:  We have insufficient revenues to meet our obligations.  The only reasonable way to grow revenues is to increase the receipts coming to the Treasury.  The most effective, longest-lasting way to do this is to create more tax payers and grow the economy as fast as possible.  Our obligations still must be brought under control and reformed.  We call it entitlement reform.  We cannot afford Obamacare.  We cannot afford our Medicare obligations as they currently exist.  We need responsible politicians; someone who will look at the situation and see it for what it is and be an adult and make the hard decisions.  Help!

Which brings us full circle to the Shakedown.  Five banks cannot make loans if they have a $25 billion nut to crack because of an individual President’s vendetta.  That money has to come from somewhere, and usually means fewer loans and fewer employees, which only exacerbates the budget deficit.  When banks lend, that money gets circulated through the economy and creates jobs, tax revenues and, yes, wealth.  And to my knowledge, being wealthy is not a sin, although greed is.

Let’s hope that the Republican nominee, whoever he is, will man up and take responsibility for our fiscal situation and be serious.  Because the incumbent can no longer be taken seriously.

About the Author

Mr. Durant is a member of a Financial Services firm in Clive, Iowa. He holds a Bachelor of Arts Degree in History from Siena College in Loudonville, NY and an MBA from Ashland University in Ashland, OH.

 

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