Although, this plan is not my first choice, it’s about time Obama took the gloves off with the banksters.
President Obama laid down his proposal for a new tax on the nation’s largest financial institutions on Thursday, saying he wanted “to recover every single dime the American people are owed” for bailing out the economy
With both anti-Wall Street sentiment and the budget deficit running high, Democratic leaders on Capitol Hill welcomed the proposal, which could ultimately raise up to $117 billion to cover projected bailout losses. Republicans were uncharacteristically silent, their instinctive opposition to tax increases apparently checked by their fear of defending big bankers. And the financial industry lobby seemed splintered, with small community banks happily exempted.
The biggest question, then, might be whether liberals in Mr. Obama’s own party would press him to go even further than he and Democratic moderates wanted to go. About the same time that the president was announcing his plan at the White House, a group of House Democrats held a news conference to call for a 50 percent tax on bonuses exceeding $50,000 at banks that took bailout money.
The administration has opposed taxing bonuses in the past, saying shareholders should determine corporate pay policies. Mr. Obama, in his remarks, suggested that his proposal to tax some of banks’ assets could have the same effect, by forcing them to shrink the size of their bonuses in turn.
Flanked by his economic advisers at the White House, Mr. Obama spoke in some of his harshest language to date about the resurgent financial industry.
“We’re already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair,” he said. “That by some twisted logic it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.”
Mr. Obama continued, “What I say to these executives is this: Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities” — including by rolling back bonuses.
The proposed tax would apply to bank, thrift and insurance companies with more than $50 billion in assets and would start after June 30. It would not apply to certain holdings, like customers’ insured savings, but to assets in risk-taking operations. The levy would raise an estimated $90 billion over 10 years, according to the White House.
But it would remain in force longer if all losses to the bailout fund, the Troubled Asset Relief Program, were not recovered after a decade. The Treasury now projects that the losses from the $700 billion loan program, which was created in October 2008, could reach $117 billion, about a third of the loss that it projected last summer — an improved forecast that reflected the renewed strength on Wall Street.
The White House said that collecting $117 billion would take about 12 years, but Treasury officials said losses were likely to be smaller. Still, with postrecession deficits at levels unseen since World War II and Wall Street never broadly popular, the pressure on a future president and Congress to keep the tax in place is likely to be substantial. Administration officials did not outline any provision for having the tax expire once all the money is recouped.
Big banks object that most of them already have repaid the government with interest. The administration, anticipating that argument, called its tax a “financial crisis responsibility fee” aimed at those institutions whose risk-taking caused the problem in the first place.
The losses from the bailout fund are expected from money paid to rescue Chrysler and General Motors and the insurance giant American International Group, and from a program to help homeowners avert foreclosures. But big banks shared in the A.I.G. bailout, splitting about $60 billion to receive full repayment for their financial trades with the company.
Mr. Obama’s economic team began seeking a bank fee last August, even as the administration — and in particular the Treasury secretary, Timothy F. Geithner — was being attacked by critics on the left and right as too cozy with Wall Street. Criticism picked up last year after Mr. Geithner opposed an effort by the European Union to impose a global tax on financial transactions.
Mr. Geithner said such a tax would be passed through to customers. The administration now argues that big banks will not be able to pass on the costs of its levy without risking a loss of market share to rivals that are not subject to the tax.
The proposal, which Mr. Obama will include in his budget in February, would require Congress’s approval… [emphasis added]
Inserted from <NY Times>
I can understand Obama’s position that the setting of bonuses is the stockholders’ prerogative, not the government’s, so even though I have called for a tax on bonuses in the past, I recognize that crafting such a bill to apply to only banksters without effecting bonuses legitimately earned for innovative solutions in other industries would be difficult, because the Constitution disallows bills of attainder. However, I would prefer Yves solution to impose a windfall profits tax. This measure does not go far enough. Banksters need to be held criminally and civilly liable for the financial damage, in addition to the pain and suffering, they have caused everyday Americans. The banksters’ voracious greed in causing this crisis must not be overlooked. I’m inclined to support this plan, but only as a first step.
16 Responses to “Obama –vs- Banksters”
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Fee 'em is fine but I do honestly believe that a new albeit smaller bubble is coming in the commercial real estate market that is going to be tax payer funded when it crashes.
You know what bugs me about the huge executive bonuses ? They far outweigh the amount of capitalist profit given out as shareholder dividends.
What we are getting is some sort of financial justice, but if someone broke into my home, stole my possessions, got caught, gave them back, they wouldn't let them get off scot free.
The Wall Street banks broke into our retirement accounts, used our money in risky deals, lost our money, we the abused, help them out, and they go back about their business, admitting "we made mistakes" hell you did.
I wholeheartedly support the President in his call for a "piggish profits" tax on these huge, insensitive and self-centered big banks. As far as I'm concerned, they're all involved in a Ponzi scheme for their own benefit which is being funded by their duped investors. OFF WITH THEIR HEADS!!!
Yes! This is the kind of thing we vote for Democrats for! True, it could go further — but coming from a cautious centrist like Obama, such tough talk is welcome indeed.
And, yes, let's hope this is just a first step and further measures are taken. A groundswell of public approval for the fee plan would help encourage more.
My concern is that the banks will just pass the fee expense along to their customers. Are there any provisions to prevent that?
I agree that the banks should be made to pay for this mess. Otis has suggested a tax based on leverage (which is what caused this whole issue to begin with – because banks were leveraged sometimes more than 70 to 1 on their assets). I support the tax and hope it can get through Congress, even with the wussified Dems in there.
I can't wait to see what loopholes the banks discover to get their money back post-fee.
Just read a little more about this in the local paper — the plan is that since smaller banks won't be hit with the fees, the big ones won't be able to pass along the costs to consumers because that would put them at a competitive disadvantage with smaller banks.
Some members of both Houses actually want even tougher measures, such a heavy taxes on bonuses.
Maybe they'll actually get this done.
I own a few stocks TomCat. I'm sure we all do.
The rules in regards to bonuses are ridiculously skewed in favor of the fatcats. It's the boards that decide compensation. And the CEO of this company is on the board of another company who's CEO is on the first board. And so on.
The shareholders ain't got shit to say about anything.
Sheila Bair has put forward a plan as well,a systemic change rather than a temporary deal. it ties FDIC levies to executive compensation.Those institutions whose executive pay encourages excessive risk would pay more, those institutions whose compensation is weighted toward stock and encourage long term viability would pay a smaller levy.
http://www.nakedcapitalism.com/2010/01/bair-offers-her-own-solution-on-bank-compensation.html
I want Shelia Bair's children. Shh, don't tell Lisa. Oh, crap, she will probably read that. I love that woman. SHE should be Tres. Sec. or at least head of the SEC.
I think that we should have a Leverage Levy. The more leverage a firm, any firm (hedge fund, ins. group, bank, investment group, individual, ANY FIRM) takes on, the higher the tax rate. And the tax will be calculated based on the leverage multiplier against the dollars of leverage someone takes out. We can start at a tax rate of, oh, 40% and go from there. I am willing to cap it though, I think that 250% tax should be fine once you cross the 25:1 mark. I hate to say it, but we would have to include all ETFs or other 'stock traded' instruments that use leverage for their performance. That will suck in my 401k, but I am willing to suffer for the better good.
I think a leverage tax, calculated daily (heh, heh) that includes all derivatives and over-the-counter leveraged products, on a graduated scale will definately slow these assholes down. The other nice thing about a leverage tax is you can apply it uniformly.
The bonus money is gone, people. We are not getting it back at this point. We can't target anyone because that is a Bill of Attainer and will be thrown out in court. The Government gave someone money and didn't ask for anything in return, and they didn't get anything. So, Wall Street has bonuses because Bush, Paulson, and the Congress of '07 were stupid to basic contractual law. Done. Instead of 'What can we do to them now?' we should be asking 'What can we do to prevent this again?' Also, stop the leveraged trading, and everything else will fall into line. It will be hard to pay out a billion in bonuses if your firm only makes a billion in the Market. We need to target PRACTICES, not firms or people. Get some REAL regulation in the derivatives and better and tighter monitoring of the leverage.
EFTs are exchange traded funds. And, honey, it was the Congress of '08 not '07. Other than that, I agree.
I love Sheila Bair's new hairstyle.Well new as of a few months ago.
otis
I think you're busted. Lisa-go easy on the big guy.
He's fixed anyway – he couldn't make someone pregnant if he tried. 🙂 Another reason why I married him; apparently, me and sperm should not be in the same room.
worth reading, from Mark Thoma: Will the Administration’s Proposed Bank Tax Create a Moral Hazard? (ie, encourage even more risk taking)
Lisa,
it can make a mess sometimes.wise choice.
Mark, see my top post today. I agree about the bonuses.
Holte, I think DOJ should pick up pitchforks and skewer ass!
Jack I support it as far as it goes, but I want more.
Infidel they can't pass it on without giving smaller banks, who will not be taxed, a competitive advantage. Ahhh… I see you already answered yourself. 🙂
Lisa, what a great idea he had.
Randal, I trust they will find some.
Truth, that's true, but if enough stockholders get pissed enough, they can withhold their proxies and fire the BOD. I've seen it happen, though decades ago.
Oso, that's another good idea.
Otis, you're busted. You said We need to target PRACTICES, not firms or people. Get some REAL regulation in the derivatives and better and tighter monitoring of the leverage. That sums it up perfectly.
Lisa, you're losing him to Sheila. Don't let him get away. he's a keeper. 😉
LOL, OSO!
Lisa, you neutered him?!!? 😉
Thanks, RJ!