Dear Mr. Obama: Interest is the “penalty” for borrowing money.

In President Obama’s push for a “fee” on banks to recoup losses from the TRAP plan.  He and his administration continue to confuse economics and with wealth redistribution and to play pretty loose with the facts.  Let’s look at this speech in a little more detail.

Losses in TARP plan.

These losses are not caused by the companies in question.  The companies currently in the administrations cross hairs have paid back there TARP loans with interest…technically since they were forced to sell stock, the repayments are dividends (Nasdaq: Banks participating in TARP have so far paid the U.S. Treasury more than $4.9 billion in dividends).   The loses in TARP come from the banks that failed, Fannie Mae and Freddie Mac and government take-over of the car industry.  Charging these banks for those failed government investments is simply wrong.

According to the President’s argument, recovering from the brink, repaying your loan including additional dividends and then trurinign huge losses into profits, puts you in hot water.  There was no mention of the failures and those still in trouble, especially those government run entities that continue to bleed tax payer dollars.    If the bailouts were not supposed to help the banks get back on sound footing, why did the government force them to take funds?   The logical conclusion from these arguments is that the bailouts were not supposed to fix the banking sector but only to provide the government control over the banks.   Repaying the loan should have released the banks from their obligations and the control of their debtors.    But it does not and new controls must now be out in place.

This kind of action would never be accepted in any private transaction.  Imagine, once you have paid a loan in full and closed out you account, they call you back and let you know that they do not like you and have decided to reopen your account and start charging you fees.  That your ability to repay the loan has proven to them that you are dishonest and these fees are needed to cover losses on other accounts on which they cannot connect.

That stubborn piece of paper.

That is exactly what the President is doing to these banks.    But he goes beyond that and goes after other banks as well.  Others that never took bailout.  I would even wager some that were not involved in trading “toxic assets” in the first place.

Lucky for many, if they have the guts to fight, our founders had been fighting against just such political action.    It is called a “bill of attainder“.   A brief definition:  A bill of attainder was a legislative act that singled out one or more persons and imposed punishment on them, without benefit of trial.  Article 1 section 9 of The Constitution specifically states, “No bill of attainder or ex post facto Law shall be passed.”

These actions by the President mirror those of the King of England that we created a country to stop.   He is charging them a fee for the perception of dishonest practice.  It is simply political action to penalize a particular group for which he has contempt.   I do not pretend that there is not a lot of contempt among many Americans as well.

As Washington stated, “We are a country of laws, not a country of men.”  Our laws protect us from the emotion of a given time or given issue.   The Constitutional protections have been used to protect U.S. protected citizens when congress made it a crime for members of the Communist party to serve as officers of a labor union.  I find it ironic that the same protection that preserved the rights of communists is now needed to protect the rights of capitalists.

Conclusion

Those dividends and the loan repayment is the penalty paid by the banks to the US taxpayer.     Our most sacred laws are the U.S. Constitution and if those can be ignored by the emotion of the situation we are all in trouble.   We may distrust the bankers but unless we are willing to try them in court for specific or perceived crimes (i.e. Bernie Madoff), we have to let them move on with their business and we should get one with ours.