Jon Meacham on Those Stupid Voters

http://www.futureofcapitalism.com/2010/11/jon-meacham-on-those-stupid-voters

From Jon Meacham's Bloomberg News column:

A Bloomberg National Poll conducted in late October found that by a 2-to- 1 margin, likely midterm voters think taxes have gone up, the economy has shrunk, and the billions lent to banks as part of the Troubled Asset Relief Program will not be recovered. Wrong, wrong, and wrong.

Facts, as John Adams said, are stubborn things. The purportedly anti-business Obama has presided over rising corporate profits and a successful rescue of the American auto industry.

Facts are indeed stubborn things, and if anyone is wrong, wrong, and wrong, here, it isn't the American voters, but Mr. Meacham.

Taxes have gone up; before Mr. Obama had been in office for a month he signed a law increasing the tobacco tax by $71 billion over 10 years. A 10% tax on tanning salons went into effect on July 1, a tax increase of $2.7 billion over 10 years. That's not even mentioning the ObamaCare penalties for not being insured, which the administration is defending from Constitutional challenge by claiming they are taxes.

The economy has shrunk; according to the Bureau of Economic Analysis of the Department of Commerce, real GDP in 2005 chained dollars, seasonally adjusted at annual rates, was $13.359 trillion in the second quarter of 2008, and was $13.260 trillion in the third quarter of 2010, the most recent quarter for which the statistic is available. So the economy has shrunk from its Bush-era highs.

As for whether the billions "lent" to banks as part of TARP will be recovered, that is speculation about what will happen in the future. It isn't a "fact," and Mr. Meacham can't know whether someone who thinks the money won't all be repaid is "wrong." They could be wrong or they could be right. The most recent weekly TARP Transactions Report from the Treasury Department shows that so far, of the $204,940,341,320 that the government put into banks through the Capital Purchase Program, $152,903,732,391 has been repaid. Of the rest of the money, it seems clear that at least some of it the government is never going to get back.

A few examples: TARP put $2,330,000,000 into CIT Group on December 31, 2008. CIT went bankrupt and Treasury's preferred stock and warrants became contingent value rights, which then "expired without value."

Okay, CIT was and is not a "bank." What about Pacific Coast National Bancorp, of San Clemente, Calif.? Treasury put in $4,120,000. As the TARP report puts it, "On 2/11/2010, Pacific Coast National Bancorp dismissed its bankruptcy proceedings with no recovery to any creditors or investors, including Treasury, and the investment was extinguished."

Or how about another bank, TIB Bank of Naples, Fla.? Treasury invested $37 million in TIB Financial Corp. and received preferred stock and warrants that it sold in their entirety for a total of $12,159,637.37. That's a net loss of more than $24 million. which, contra Mr. Meacham, is not going to be recovered.

As for Mr. Meacham's reference to the president's "successful rescue of the American auto industry," successful for whom? Not for the Chrysler bondholders who sued to try to stop the deal. Not for the out of luck non-union retired GM managers, who lost their pension benefits while the government bailed out the union pension plan. They're suing, too. Not for the federal government, which is selling its GM shares at a loss. Not for Toyota's American shareholders, dealers, or employees, who now have to compete with a General Motors that is owned by the same government that has the power to hype Toyota's supposed sudden acceleration problems.

I don't know Mr. Meacham well. I do know him a little, I've admired some of his work, and he has always been exceedingly gracious to me. But I think the American public understands this stuff better than he does, which is something he may want to consider the next time he feels the impulse to accuse the American public of being ignorant of the "facts."

by Ira Stoll  |  Nov 6, 2010 at 11:55 pm Related Topics:  Auto Industry, Banking, Capital Markets Regulation, Politics, President Obama, Press, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list