More from Dodd/Frank “reform” boot-to-the-face – a bailout tax

frank n dodd

FrankenDodd - the bailout twins

Any time the word “reform” emanates from the pie hole of some politician, bureaucrat, or government apparatchik, you can simply substitute the acronym “BOHICA” and be closer to the truth. Nothing exemplifies this better than the massive (2000+ pages) economy-killing boot-to-the-face “Frankendodd” financial “reform” bill currently swirling through the toilet that is congress.

According to this story (from the WSJ), the bailout twins have added even more bailout goodness to this POS bill in the form of a “bailout tax.”

A new tax on financial companies seemed like a good idea to Chris Dodd and Barney Frank at 3 a.m. last Friday, but now their $19 billion levy is threatening to blow up their 2,319-page financial bill. So they’re scrambling to replace that cash, but the bigger news here is that Barney and Chris need to impose a bailout tax for what they claim is a bill that will end bailouts.

This is the real reason that the tax came out of nowhere in the middle of the night after having been rejected earlier by the Senate. And on Monday the Congressional Budget Office made it official when it released its cost estimate for the Dodd-Frank Wall Street Reform and Consumer Protection Act.

CBO estimates that the bill’s vaunted “Orderly Liquidation Authority,” which is being sold as tough medicine for failing banks and their creditors, will cost taxpayers $20.3 billion between now and 2020. CBO estimated how likely it is that one or more big financial firms will fail, how many tax dollars the Federal Deposit Insurance Corporation would likely pour into these losers to assist creditors, and how much taxpayers might recover as this “resolution process” proceeds.

Why $20.3 billion? CBO isn’t releasing its assumptions, but it hardly matters because the number can’t possibly be more than a guess. The failure of Citigroup alone could cost many times that, much as the failure of Fannie Mae and Freddie Mac has already cost taxpayers $145 billion and counting. That $20.3 billion is best understood to be the potential cost discounted to what you might call the net present political value.

The $19 billion Dodd-Frank bailout tax was especially pernicious because it essentially left it to regulators to decide who would pay. The sages at the new Financial Stability Council would make the call, guided by, among other factors, a particular company’s “importance as a source of credit for households, businesses, and State and local governments” and “the company’s importance as a source of credit for low-income, minority, or underserved communities and the impact the failure of such company would have on the availability of credit in such communities.” Imagine the corruption and favoritism possibilities.

These two douchebags had leading roles in the disaster that led to the current recession. The fact that they are in charge of writing legislation to “reform” a system they helped to destroy is the ultimate irony.

The money quote from the WSJ article is here:

Most absurd is the claim that any of this money, however it is raised, will somehow be reserved for bank failures. Congress will spend it immediately. Taxpayers will pay for bailouts like they always do, when they happen, and this bill makes them more likely.

Indeed…

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2 Responses to “More from Dodd/Frank “reform” boot-to-the-face – a bailout tax”

  1. […] of taxpayer BOHICA goodness. From creating a massive new bureaucracy (more here) to a bailout tax (more here) for Dodd’s big business cronies (more here) to social reform and wealth redistribution (more […]

  2. Title XII of Dodd-Frank should be called ACORN on steroids. For some reason, this provision has not gotten much press. But here are the key points:

    1. Dodd-Frank autorizes grants (tax-payer money that doesn’t have to be paid back) to sub-prime borrowers. These grants are to be doled out by ACORN-like organizations.

    2. If some of these sub-prime loans are not paid back, no problem. Dodd-Frank provides additional grants for the tax-payers to pick up these bad debts.

    3. The loans in question are up to $2,500, payable in installments.

    4. In case the sub-prime lender can’t figure out how to get these ‘loans’, Dodd-Frank provides additional grants to the same ACORN-like organizations for ‘education’.

    Seems like a nice way to buy votes.

    For details, see: http://www.capital-flow-watch.net/eespk

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