The Business Of Being President

>> Friday, January 22, 2010

"Good design can't fix broken business models." ~ Jeffrey Veen

Barack Hussein Obama recently made a comment that made me so angry, I had to wait until now to write a commentary. Now that I've calmed down somewhat, I will comment.

I was watching a report on TV about Obama stumping for Martha Coakley in Massachusetts, when the news program played a clip of Obama announcing his plan to charge a fee to banks and institutions who are giving millions of dollars of bonuses to their executives.

I had to google it to find it, and I confess, what I found isn't exactly what I heard, but it is essentially the same thing. This is from FOX news' website,

...Obama, striking an emphatic and populist tone, said Thursday that he is determined to recoup every dollar spent from the $700 billion Troubled Asset Relief Program to rescue Wall Street firms with a new tax on the largest banks.

"We want our money back and we're going to get it," he said.

Obama described bank bonuses as "obscene" and said the new tax would cover a projected $117 billion shortfall in the government's financial crisis bailout fund.

Upon hearing the report, I gasped in amazement.

Isn't Obama Harvard educated?

Is he not considered by Democrats to be something of a genius?

He's the (illegally) duly elected President of the United States, is he not?

Doesn't attaining the office of President of the United States imply he has at least as much intelligence as a fifth grader?

Then why doesn't he understand simple arithmetic?

Why does he not understand basic business principles?

I am not a businessman, but even I understand businesses compensate for loss of profits by raising prices on goods and services.

How does Obama's ambitious plan affect business?

Look. It's simple:

If Obama charges a fee or a tax to the corporations who pay "obscene" bonuses, the companies will simply raise their prices on goods and services. If, as he says, he only charges banks new taxes or fees, they will pass the loss in profit onto their customers in the form of higher fees and prices.

Those customers include every business that every one of us does business with on a daily basis.

Grocery stores, Department stores, Home improvement companies--name one.

Name any.

Name them all.

They all do business with banks.

And what happens if banks pass their expenses on to their customers? Well, naturally, they pass their expenses on to us.

The consumers.

They also lay off employees because they can no longer afford to pay them.

Let's see now. How does Obama's plan of charging more fees or taxes to banks create his promised hope?

How does it create change?

I hope he doesn't.

It's Change for the worse.

Good God!

Is he stupid or does he just think we are?


BenT - the unbeliever,  January 22, 2010 at 10:28 AM  

Economics is not a simple science. Here are some countervailing facts you may not have considered.

1. Not all customers of America's largest banks are Americans. These banks have many foreign customers, so even if every dollar of these taxes are passed down, then a portion would be paid by people other than American citizens.

2. The money must be repayed somehow since the government financed the TARP fund with borrowed money. The repayment can be made from taxes directly from the populace or by businesses.

3. These new taxes equate to about 2% of the average yearly profit of these banks. A very small sum.

4. If a bank chooses absorb the cost increase and not pass it on to consumers then they will have lower fees compared to banks that do.

5. Economic theory as you describe where every dollar of unit cost increase is passed to consumers is only applicable in small simplistic systems. Large corporation can operate division at a loss, they can accept quarterly downturns in profits because they project long-term growth. They have capital reserves to survive.

6. Many of these "too large to fail" banks customers are other businesses and corporations which will all perform the same calculus as the banks above. Pass the cost along, increase rates, absorb the cost, change banks, etc.

It is right and proper that these corporate entities repay their loans. In fact we should be asking them to repay ALL their loans not just the funds they received from the TARP program. Bank of America received almost $750-billion from the Federal Reserve at 0% interest during the bank crisis. The American Govt. had to borrow at 0.5% to cover the loan. No one is talking about the millions more that are owed to the government from the big banks.

ELAshley January 22, 2010 at 10:37 AM  

How's this for change? When the banks pass on their losses to the consumer Obama could, in liberal outrage, try to do a Chavez and just "take over" the banks. He couldn't get away with it of course, but you can bet he'd be thinking about it, and wishing our "charter of negative rights" gave him the power to do so.

The banks he's wanting to "Fee" have already paid back their borrowed TARP funds. I've said it before, and I'm saying it again... Who the hell is Barack Obama (or ANY president for that matter) to decide what a private company can pay it's employees? The doctrine of Eminent Domain does not extend to confiscating the compensatory rights of private business. If he want's to get "the peoples" money back, why not go after Fannie and Freddie? And return ALL unspent stimulus monies?


Rats are leaping frantically from the decks of the HMS Obama. Even the media is turning on him, and that surprises the hell out of me. Everyone seems to be jockeying for position in the "blame Obama" crowd, crying vociferously "I never drank the Obama Kool-aid!"


Yet he remains tragically tone deaf. Chin defiantly held a little higher, coat and collar pulled more tightly close, doggedly plodding forward into the winds of cold, unexpectedly REAL change. That's our president and democratic leaders, defiant in the face of those they purport to represent. The office of president is not a throne room. No president is king. And Obama is just beginning to grasp this very elementary concept. And I dare say he's pissed as hell.

If Democrats lose big in November, he's toast. His agenda for this year is already browning on the edges. He won't get Cap & Tax. He can't even dream of bringing up immigration reform, and the crash cart's being wheeled in for Health Care.

Obama is undeniable the worst president in more than half a century. Worse, even, than Jimmy Carter. And that's saying a lot. He's won a fake Nobel Peace prize, but nothing else beside the distinction of being the first, and perhaps last, black president. He lost the Olympics, Global Warming, New Jersey, Virginia, Massachusetts, and now health care.

ELAshley January 22, 2010 at 10:40 AM  

"The banks he's wanting to "Fee" have already paid back their borrowed TARP funds."

MOST of them have.

ELAshley January 22, 2010 at 10:58 AM  

Furthermore, the banks giving away these so-called "obscene" bonuses HAVE paid the government back. So, what? Obama expects these banks, who've already paid the government back to pay a fee so the government can get back what other banks haven't yet paid back? How is that even remotely fair?

Hell, if we applied that template to the American farmers, large profitable companies like Monsanto would be paying to keep small independent farmers out of foreclosure... their farms off the auction block. But imagine the squealing from large profitable farming operations (like Monsanto) if they were slapped with a "fee" to get back what smaller operations owe the government.

Edwin Drood January 22, 2010 at 11:45 AM  

Every time Obama touches the economy it get significantly worse. This may be because he has absolutely no experience in the private sector.

Can anyone give an example of Obama making the economy better? Should we allow his to touch it again?

If anyone tries to say the economy would be worse if Obama did nothing that is known as "quantifying the counterfactual" it is total nonsense. Obama learned that in school but still says it on TV because he knows his followers are morons.

BenT - the unbeliever,  January 22, 2010 at 1:45 PM  

Edwin, you do know that the recession has ended? For the last two quarters GDP growth has been positive. Even the Heritage Foundation and the American enterprise Institute say the stimulus was a positive boost to the economy.

Yeah its a disappointment that jobs haven't rebound like the large banks, but they will given time. Orders for goods are on the rise and that will lead to job growth over this next year.

It was a republican presidential administration that presided over the start of the recession. And to look at history every private sector business George Bush was ever associated with went bankrupt.

just sayin'

Edwin Drood January 22, 2010 at 2:53 PM  

I also find it interesting that libs are back to the traditional definition of a recession. When Bush was President a recession was three consecutive quarters of declining growth, now under a Obama a recession is over when there's any growth at all.

If Obama is so great and smart then why do you set the bar so low for him.

Oh by the way TARP 1 was a positive boost to the economy, (Bush's tarp) TARP 2 has done nothing.

BenT - the unbeliever has blind faith in Obama. Is that irony ???

ELAshley January 22, 2010 at 3:00 PM  

One wonders where you get your information.

From the Heritage Foundation, dated January 12, 2010...
Morning Bell: $787 Billion in Stimulus, Zero Jobs "Created or Saved"

From December 4, 2009...
Obama’s Failed Stimulus in Pictures: Jobs Gap Grows to 7.6 Million

The US Economic Outlook (MS Power Point)

From Powerline Blog, January 8, 2010:
Prolonging the Recession Excerpt:

"Today's economic news is very bad--another 85,000 jobs lost in December, and unemployment stuck at 10 percent. In Monday's Wall Street Journal, economists Gary Becker, Steven Davis and Kevin Murphy explained how the Democrats' failed economic policies have helped to lengthen and deepen the current recession... What we are seeing, in other words, is Barack Obama's economy--the foreseeable consequence of the terrible economic policies that he, Nancy Pelosi and Harry Reid have imposed or threatened to impose on the nation. There will of course be a recovery, as always; but that recovery will be much stronger and faster if Congress makes clear that it will block any further assaults on the economy in the form of cap and trade, massive tax increases, and so on."

The jobless rate saw a decline in Nov-Dec because of the holidays but the most recent figures shows unemployment has increased. The unemployment figure dropped to below 10 and now it's gone back up. The recession is over? Perhaps in terms of strict definitions, but unless you provide numbers and sources for them I can't take 'em seriously.

ELAshley January 22, 2010 at 3:01 PM  

A quick list of headline on Google (searching: US Recession Over?)

US Stocks Fall for Third Day as Google, US Steel Drop
BEFORE THE BELL: US Stock Futures Turn Lower After GE Report
Mortimer Zuckerman: The Great Recession Continues
US economy needs a second stimulus

The recession may be over... on paper. But that hardly means anyone working paycheck to paycheck is going to see any relief.

Truth is, Obama's economic policies have been a disaster for this country. And let's not forget that the Democrats were in charge of the purse strings for some time during Bush's administration. Bush wasn't perfect by any means... he signed TARP into law, after all (and Obama supported it). But Obama doubled and tripled down with Stimulus. And now he wants Son of Stimulus?

ELAshley January 22, 2010 at 3:06 PM  

Obama is dead meat in a shark tank. And he only has himself to blame. HE'S the one who sought out all those radicals and Marxists in college. Marxists are great at telling folks how to start a revolution but they have no answers on how to manage what they've usurped.

Saul Alinsky... prime example. Lot's of 'how to's' on tearing down. But nothing on 'building up' or 'managing'.

ELAshley January 22, 2010 at 3:07 PM  

And that's what we're left with in Obama. A Community Organizer in Chief with no 'real world' organization skills.

BenT - the unbeliever,  January 22, 2010 at 3:52 PM  

"HE'S the one who sought out all those radicals and Marxists in college."

What you are in essence saying is that every person Barack Obama has ever met or associated with reflects his inner feelings 100%. Because he was around far-left figures 20 years ago he is a secret far-left liberal. Because he once met a weahterman he's a secret devotee of the weathermen.

Should we apply the same ridiculous standard to you EL? Are you the reflection of those you knew 20 years ago? Are you even the same person you yourself were 5 years ago? Stop listening to Limbaugh. He rots your brain.

If Barack, Harry and Nancy were getting everything they wanted. If they could even half-way corral the congressional democratic caucus then the stimulus would have been $.7-trillion instead of $900-billion, healthcare reform would have been finished and signed months ago with a national public option or even universal single-payer coverage.

What dems have been able to accomplish is legislation saying that female private contractors can in fact bring legal charges if they are sexually assaulted in Iraq. And the Lily-Ledbetter Equal Pay act which works to equalize pay for women. Aren't those awful accomplishments. It's so easy to see why the country hates dem's when three-quarters of the republican caucus voted against giving women raped in Iraq the right to file charges against their attackers.

Also I want to mention that all the Tea Party Organizer can now be classified as you guessed it Community Organizers. So I would stop painting slurs with such a large brush.

AEI: Economic Outlook for 2010
The real economy ... responded to the massive stimulus but remained heavily dependent on it. In the United States, growth during the second half of 2009 probably averaged about 3 percent. Absent temporary fiscal stimulus and inventory rebuilding, which taken together added about 4 percentage points to U.S. growth, the economy would have contracted at about a 1 percent annual rate during the second half of 2009.

Mark January 23, 2010 at 9:03 AM  

Bent, point 1: So what? The other countries can take care of themselves. Are we the world's baby sitter?

Point 2: The government, which is you and I, big boy, Should have never lent the money in the first place. If a bank can't manage themselves good enough to survive without help, they deserve to fail, and companies will take their businesses somewhere where the bankers know how to manage their money wisely.

Point 3: 2% of billions is unacceptable.

Point 4: No businessman in his right mind will ever choose to absorb a cost increase without making up for it in the form of higher prices for whatever goods and services he provides. He will not take a cut in his profit line.

Point 5: Companies, large or small, are not in business to operate at a loss. If Barry continues to steal from them, they won't have capital reserves for very long. That's the long term projection that they see.

Point 6: Exactly. You are making my point, only not as clearly.

Except, they have no intention of simply absorbing the loss without recouping their loss. That is economic suicide. They will ALWAYS make sure they will make their profits. Which is why it is a hare-brained, stupid decision on Obama's part.

You are correct though. They should pay back any and all loans they have received. That's the way it is supposed to work. As I said, We the Government should have never made the loans to them in the first place. But now that we have, they should pay them back, no question.

And, following that logic, people on welfare should be made to pay back the money they got from the government, too. In fact, any money the government distributes to anyone for any reason should be paid back. With interest.

BenT - the unbeliever,  January 26, 2010 at 9:02 AM  

You seem to be contradicting yourself.

First "No businessman in his right mind will ever choose to absorb a cost increase without making up for it in the form of higher prices for whatever goods and services he provides."

Then "They should pay back any and all loans they have received. That's the way it is supposed to work."

Finally I want to address your point "If a bank can't manage themselves good enough to survive without help, they deserve to fail"

What happens if you substitute power company for bank? Would we allow a power company to fail? How about a major retailer like Wal-mart. They are the largest private employer in the nation. There are private companies too large to allow to fail. Because their failure would have unavoidable adverse side-effects.

Maybe you weren't thinking about how banks work, maybe you don't know. But banks don't have enough money in their safes to repay all their depositors. Not large banks and not small banks either.

Banks make money by taking in deposits and then loaning those monies out again. So that the $100 you deposited is quickly lent out to your community as a home loan or a business loan. And everything works fine as long as all the depositors don't all want their money back at the same time. The bank makes enough profit from interest on loans and fees to depositors that they can even pay you one or two percent for the privilege of using your $100.

So when a bank fails someone gets stuck holding the bag. For individual consumers we have insurance when a bank collapses the FDIC since the Great Depression has guaranteed deposits at banks up to $100,000. So we don't have to worry if our local bank goes belly up. But $100,000 isn't anything compared to the accounts of a large or even medium sized business.

And that is why we couldn't let these large banks fail. Because if Bank of America goes bankrupt that will mean ten's of thousands of other small, medium and large businesses will go belly up too.

ELAshley January 26, 2010 at 11:28 AM  

Substituting 'bank' for 'power company'? It's a straw-dog... not a valid argument.

If Banks make bad loans, banks should me made to absorb the loss. Everyone else in America has to absorb their losses. I lost half my 401k's value in a year! I have to absorb that cost because government's not going to bail me out.

The government should've stayed out of the Banks business to begin with-- it was Government that demanded banks make loans they wouldn't have made otherwise. Government interference is the cause of the housing market... that and men like Chris Dodd and Barney Frank, to say nothing of Community Agitators nationwide.

No one here, I believe, wants banks to fail OR not pay back what they owe. The problem here is yet more government interference in the form of Obama wanting to tax ALL banks (including those who have already paid their debts) to recoup 'the People's money,' as if he really cares about the people.

Example: Another straw dog...

Eight of your neighbors can't pay their power bills, so the power company charges YOU for what they owe because YOU always pay on time. How is that for 'fair'?

What Obama wants to do is both unjust, and immoral. And it ought to be illegal.

BenT - the unbeliever,  January 26, 2010 at 5:33 PM  

If home lending laws from the 70's were the major factor that lead to the foreclosure crisis, then there would not now be a repeat of that same foreclosure crisis in commercial real estate. Shopping malls and skyscrapers all across the country are being defaulted and foreclosed upon. And none of those originating loans came about because of the low income home ownership laws.

Additionally the fact that of the 25 top originating banks for home loan foreclosures. Only one was subject to the home lending laws.

It's a nice thought that large banks like AIG or Leahman Brothers and such could be allowed to collapse into bankruptcy without every other business in America being rattled. Such is simply not the case. ... These large banks are like octopi with arms into everything. When they die, the rot can spread everywhere.

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Young Turk:
Date: 1908
Function: noun
Etymology: Young Turks, a 20th century revolutionary party in Turkey
:an insurgent or a member of an insurgent group especially in a political party : radical; broadly
:one advocating changes within a usually established group.

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