Please read the introduction and the article at the link and be prepared to discuss in class on Wednesday night. We will use this as an example for future blog discussions, which will follow this format:
1. Situation analysis
2. Identify relevant issue(s)
3. Impacts
4. Goal/desired outcome(s)
5. Stakeholders
6. Message strategy
7. Tactics
8. Measures of success
President Obama has announced that he intends to seek new taxes on banks that received federal loans under the Toxic Asset Relief Program. The Financial Crisis Responsibility Fee would raise $90 billion over 10 years and would apply to major banks -- even those that have already repaid their government loans.
Is this measure intended to shore-up the financial system, or is it designed to punish banks for issuing executive bonuses?
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/16/AR2010011602831.html
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I think the FCR Fee is a tactic that shows this administration is looking into the future. Also, Obama is holding all of the senators and representatives on the Hill to the fire. Bad credit decisions stay with the average person for seven years, but because the big banks were able to pay their loans back so quickly (and with interest) they want it forgotten just as quick. I don't think the people in charge of those banks, and our elected officials on the Hill, have allowed the financial situation really to sink in to the fact that this happened, mostly because their income bracket was not hit as severely in the same manner. That also shows a major disconnect with the people "back home" that they are representing.
The financial crisis responsibility fee appears to be a measure to increase revenue and rev up the country's financial system. The impact that the monies would have on major national banks which were initially bailed out would be a steady, yet sizable amount distributed over a 10 year span. On the surface, I think it appears as a punishment for the banking industry, however when you look at the stakeholders involved a very clear message strategy has been laid out by the Obama administration. To sum it up, it is a " You play, You pay "sort of approach.
His tactics used in his radio address clearly indicate a disciplinary approach, however Obama still remains quite measured in his actions on this issue for obvious political reasons. The variables involved will be the determinant on how successful this reform actually turns out to be .
(Sorry for the multiple posts and erased comments, technical difficulties and user error...!)
The FCR Fee, as proposed and supported by President Obama, would require 50 companies to pay $90 billion in over 10 years. Some of the questions and issues which arise from this proposal include;
- How are the 50 companies who will be charged the FCR Fee chosen?
- Should private business' payrolls be open for public scrutiny? Under what circumstances, and for how long?
- Should banks who have already paid back the money they borrowed be further punished for the financial crisis (which they may or may not have contributed to)? Where does the accountability end?
- It is unclear in the article if the $90 billion covers the bailout funds ONLY or the bailout funds and all other costs associated with the bailout and crisis? How was the $90 billion figure calculated?
- Is each of the 50 companies equally "responsible" for the economic crisis and therefore equally responsible for the $90 billion payback?
The impact of the FCR Fee is unclear. The banks claim that if they have to pay the FCR Fee they will not have adequate funds free for consumer lending, which if it is true, could exacerbate lending issues.
The goal of the FCR Fee, at least on its face, is to recoup the costs associated with the bank bailout. The question is - Is this fee more interested in punishment than creating stability in the marketplace?
The stakeholders include; the American public, all American banks, homeowners, etc. I agree with Perla on Obama's tactics, he is taking a disciplinary approach with the FCR Fee, however his speech appears moderate and tempered.
The response to Obama's radio address (by the American public, political elite, and others) is one measurement of Obama's approach in tackling the FCR Fee issue. I would also be interested in seeing the banks response to this proposal as well, since they are the ones most intimately affected by the FCR Fee.
It definitely looks punitive on the surface, but I also think it's a matter of pride after the banks didn't spend the loan the way the administration thought they would. With many other issues on the table lacking full support, the Administration probably feels that this is one issue that they can garner public support on and raise the overall support in the polls for the administration in hopes of it carrying over to some of the tougher issues on the table now.
I believe the financial crisis responsibility fee is Obama’s way of punishing the banks for bonuses. It is his way of showing the financial industry that there are repercussions for borrowing money from the taxpayers. I feel that if Obama really wants to help fix the financial industry, and ensure that a crisis doesn’t happen again, he needs to enforce stricter regulations. The FCR fee is like a slap on the hand to banks. It won’t deter them from using the same bad practices that got the US into the financial crisis. If regulations are not changed the banks will continue to borrow against their bad debt and the US may need to bail out the banks in another few years.
The financial crisis responsibility fee, as announced in President Obama's weekly radio address, would require 50 of the nation's largest banks to settle their debt to taxpayers.
In response, banks declare the tax is unfair. Many banks have already paid back the government for the borrowed funds. While accountability is an issue, banks may continue to offer their executives hefty bonuses. Rewards for outstanding leadership and service is fine, but excessive bonuses can be unwelcome, especially during tough economic times. People should be compensated for operating a successful banking business. However, I agree with Katie that stricter regulations need to be enforced.
In a recent article, Associated Press (AP) Writer Jim Kuhnhenn points out that Obama said "For, while the financial system is far stronger today than it was one year ago, it's still operating under the same rules that led to its near-collapse."
President Obama has vowed to continue to work with Congress on financial reforms to protect the American economy and the American taxpayers from future crises.
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