John Feehery: Speaking Engagements


The Wrath of Obama

Posted on January 14, 2010

When I was in high school, and I did a particularly poor job of picking out my clothes for the day, my mother would say that I looked like the Wrath of God.

In other words, not very good.

That thought came to me as I read accounts of the performance of Goldman Sachs CEO Lloyd Blankenfein before the Financial Crisis Inquiry Commission.

Blankenfein famously told one reporter in a profile piece last year that his company was doing the Lord’s work. Yesterday, he blamed the financial crisis on a series of events that were out of his control, much like Hurricane Katrina.  But this crisis was no act of God, the Chairman of Commission, Phil Angelides, pointed out.  These were the acts of men and women.

Blankenfein didn’t have much of an explanation for the Goldman practice of telling its customers to do one thing, while its traders did the exact opposite.  Maybe I am a little naïve about how the financial markets, but that seems really sleazy to me.  And if it isn’t illegal, it ought to be.

In any event, the financial services industry is not going to face the Wrath of God.  It is going to face the Wrath of the Obama Administration, and that could be far uglier.

This is exactly the wrong team to be carrying out a campaign against the banking irregularities, because they will make the situation worse.

Mr. Obama’s White House is proposing that we raise taxes on the banks, as a way to punish them for almost going broke and then making too much money.  It is unclear to me how raising these taxes is going to convince these banks to loan more money to businesses so they can create jobs.  My guess is it will make the situation even worse.

Mr. Obama’s Justice Department has decided to investigate why the banking industry doesn’t loan to minorities.   According the New York Times, “The Justice Department is beginning a major campaign against banks and mortgage brokers suspected of discriminating against minority applicants in lending, opening a new front in the Obama administration’s response to the foreclosure crisis.”  For those with a short memory, one of the principle reasons we got into this mess is because Congress put pressure on the banking industry to make subprime loans, especially to minorities, and then backstopped those risky loans by pretty much guaranteeing them with government backed securities, through Fannie Mae and Freddie Mac.  When the risky loans weren’t repaid, our economy collapsed.

So, the Obama Administration has decided to increase taxes to make it harder for banks to lend to small business.  And it has decided to threaten banks with lawsuits if they don’t make more loans to riskier loan applicants.

And that is how the Wrath of Obama asserts itself.  Instead of fixing the problem --and let’s not kid ourselves, there were some real problems in the marketplace as typified by the sleazy actions of some – the Obama White House is taking steps to make the problem worse.

In about 10 months, policy makers are going to face the wrath of the voters, and like the wrath of God, that is not going to be pretty either.