This morning we woke up to a confusing contradiction. Banking executives claiming that they simply can't afford to pay back taxpayers for their sacrifice in saving the industry while also increasing lending:
"The money to be collected is capital being pulled out of the banking system that could support ten times the amount in new lending. That's because $1 in capital supports $10 or more in lending. So the tax will pull not $90 billion in lending capacity out of the banking system, but nearly $1 trillion in potential lending."
On the same day, the front page of the Wall Street Journal blared "Banks Set for Record Pay," some $145 billion in bonuses and compensation at the very same firms.
Are we missing something?
Just to recap:
For months, Wall Street has told the American people they can't increase lending because there aren’t enough good loans to make – even as business owners with good credit apply every day and are denied the credit vital to recovery.
But now Wall Street executives and their special interest lobbyists have changed their tune: Now they say they won't be able to lend because they might have to pay the American people back for saving the financial sector from ruin.
But why didn't that logic apply when they were sitting in corporate broad rooms adding zeros to their bonus pools?
Let's do the math:
$145 billion = Estimated Bank Compensation and Bonuses in 2009, as reported by the Wall Street Journal
$1.45 trillion = the amount could hypothetically be available for lending based on the logic of the unnamed banking industry executives referenced above
The new signal seems clear: Wall Street is more interested in paying itself billions of dollars in bonuses than in paying back the American people.
There shouldn't be any confusion about where the President stands: The American people deserve to be repaid and that's exactly what's going to happen.
When the President announced the Financial Crisis Responsibility Fee yesterday, he warned that we might hear these complaints of dire impacts from Wall Street -- less than 24 hours later it is already ringing true.
"We cannot go back to business as usual. And when we see reports of firms once again engaging in risky bets to reap quick rewards, when we see a return to compensation practices that seem not to reflect what the country has been through, all that looks like business as usual to me. The financial industry has even launched a massive lobbying campaign, locking arms with the opposition party, to stand in the way of reforms to prevent another crisis. That, too, unfortunately, is business as usual. And we're already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair -- that by some twisted logic it is more appropriate for the American people to bear the costs of the bailout, rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses."
The taxpayers did not rescue the financial system because they wanted to. They rescued the financial system because they had to stop its excessive risk and destructive power from pushing the economy from recession to depression. Wall Street captured enormous benefits as a result of that rescue. Now they are going to pay it back.
Dan Pfeiffer is White House Communications Director