More than once our government has punished the oil industry by enacting a windfall profits tax. Plus, they now plan to add taxes to the oil companies to reduce the deficit. And, they keep reducing tax loopholes, like depletion allowances. Now, they have their guns turned on banks. Woe to them who make too much money.
The oil industry has to take inordinate risks to earn those windfall profits. They make a small percentage of their profits in the US anymore. They have to take risks in foreign countries with unstable governments. Iran and Russia have taken over their business. With little or no repayment. Venezuela is threatening to do the same. Risking billions that you won’t hit a dry hole is part of their business. Big risk, mostly little reward. But, when the crude price goes up because our government won’t allow drilling here, they make bigger profits. As the world’s biggest consumer of crude oil, we move the needle on crude prices. So, the government creates the windfall, then they tax it back. Hostile environment. They are doing the same thing now with the banks. The banks take risks, hire risk adverse employees, and make money and pay the people who made the money. The government has all kinks of schemes to punish the banks for making money.
Meanwhile the Fed announced they made $50 billion dollars this year. By printing up over a trillion dollars, then investing that money by buying government debt. No risk, big reward. A monkey could make money running the printing press and investing the paper. Is this a windfall profit? If printing money and investing that paper in your own securities isn’t, what is?
But, the monkeys in the Fed who do the investing are now going to buy over a trillion in mortgages from Freddie and Fannie. There goes the $50 billion. Maybe more. But, it bails out Fred and Fan to do more damage by passing out more bad mortgages.
In my judgment, the $50 billion is worse than a windfall profit. It’s close to a Bernie Madoff scam. The Fed operates with zero control from congress. No oversight. At the same time there are a myriad of bills to regulate banking and finance. The big bankers are in Washington going through the dog and pony circus the oil industry endures every time gasoline prices go up.
Here’s what I say. Stop the presses. Control the Fed. Show transparency on the decisions to invest in GM, Chrysler, Freddie and Fannie. Explain why you should be raising the debt ceiling for Freddie and Fannie and why we want to buy a trillion dollars of their bad paper. Doing both at the same time insures Freddie and Fannie will start another round of bad mortgage decisions. They can just have the Fed make it go away. While the Pay Czar ignores the $7 million in bonus money paid to the presidents of Freddie and Fannie.
Freddie and Fannie started the whole problem under the tutelage of Barney Frank. All get a pass. The Fed has set an all time record with their printing presses. They have driven the value of the dollar down and gotten a rebuke from our biggest creditor, China. They share no plan to get this money out of circulation without runaway inflation. It’s a ticking time bomb. But, Obama and his team work on setting up straw men. Keep the focus on the banks and away from the real problem. An out-of -control Federal Reserve Bank.