White House Communications Director Dan Pfeiffer pushed back against criticism of the administration’s new fee on banks in a post on the White House blog today. Pfeiffer singled out an anonymous quote on Politico, attributed to a “senior industry leader,” which alleged that the new bank fee will inhibit lending and undermine economic recovery.
“The money to be collected is capital being pulled out of the banking system that could support ten times the amount in new lending,” the senior industry leader told Politico. “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 $1 trillion in potential lending.”
Pfeiffer argues that there is a “confusing contradiction” to this line of argument.
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.
Pfeiffer also notes that on the same day in which the Politico story appeared, a front page article in the Wall St. Journal declared that banks stand to dole out “record pay,” with some $145 billion expected to be paid in bonuses and compensation at the very firms subjected to the new fee. If the logic of the unnamed banking official is right, and every dollar in capital really is equivalent to ten dollars in lending, then Pfeiffer reasons there should have been at least $1.45 trillion available for lending.
“Why didn’t that logic apply when they were sitting in corporate broad rooms adding zeros to their bonus pools,” he asks. “Wall Street captured enormous benefits as a result of that rescue. Now they are going to pay it back.”
