Still reeling from the devastating loss of Martha Coakley’s Senate race in Massachusetts, the Obama Administration has escalated its populist strategy by implementing new restrictive regulations on the nation’s largest banks. President Obama said the Government should have the power to limit the size and complexity of large financial institution as well as the ability to make high-risk trades.

This is actually the second shot across the bow of the banking industry as last week, President Obama proposed a new “Bank Tax” targeted at the largest financial and insurance institutions in the country. The intent - to insure the government recovers the estimated $117 Billion dollar loss expected in the $700 billion loan program. Big banks object in that most of them already have repaid the government with interest. In fact, the Federal Reserve recently posted a record profit of $50.2 Billion dollars. In essence, the big banks will be forced to pay for the bail out of General Motors, Chrysler, Fannie Mae and Freddie Mac.

The proposed tax, subject to Congressional approval, would apply to about 50 banks, thrifts or insurance companies with more than $50 billion in assets. “The irony is it hurts the weaker banks more than the stronger banks” said Meridith Whitney, a prominent Financial Analyst. “To think that it won’t come out of [the pockets] of consumers and businesses is mistaken.”

If approved, Citigroup would face a $2.2 Billion annual assessment. JPMorgan and Bank of America might each pay close to $2 billion a year. Goldman Sachs and Morgan Stanley would pay similar assessments. While this will not have a huge impact on these firms bottom line, it will result in higher fees and expenses for their customers. How this will help to get credit flowing and investment stimulated was not mentioned.

At this time, not much is really known about Obama’s new banking regulation other than what was said in his speech on Thursday, January 21. What little is known is that it does not seem to address the root causes of the financial collapse…. making bad loans and then securitizing (and manipulating) them on a global basis. Instead, it appears to be more of a punitive attack against Wall Street and the large banks in general. Once again, the contribution of Fannie & Freddie and the Federal Reserve on the financial collapse are neither mentioned nor addressed. The populist rhetoric seems focused on big banks, big money and big business.

Apparently, Obama is not going to abandon this populist strategy even when it failed in the land of the left, Massachusetts. It seems President Obama will utilize an “Us against Them” strategy in the upcoming mid term elections.

"That's a lot of what 2010 is going to be about," White House press secretary Robert Gibbs said. "People are going to have to decide whether the people they have in Washington are on the side of protecting the big banks, whether they're on the side of protecting the big oil companies, whether they're on the side of protecting insurance companies, or whether they're on the people's side."

While I consider myself an “objectivist”, I do not believe that ALL financial regulation is bad. I consider it both “rational” and “reasonable” to have legislative protection against the influence of greed in our financial markets. However, Obama’s populist strategy of vilifying Wall Street rather then focusing on the behavior that brought down the system is flawed. This mentality does nothing to stimulate job growth or get the economy back on track. Rather, it elevates mid-term election politics over sound rational solutions to the economic problems facing this nation.

Beware of the “Class War Fare” rhetoric of the Obama Administration. Consider this passage from Ayn Rand’s Atlas Shrugged;

“Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.”

This is John Galt Speaking!