1/4% Tax on all stock trades pushed in NY Times today
- Thread starter seasideheights
- Start date
FT says investment banks will bear a large share of the burden of the bank fee proposal
http://www.ft.com/cms/s/0/8bf7a9ba-0082-11df-b50b-00144feabdc0.html
As was reported earlier today by the WSJ, the FT cites people familiar with the situation who say that the bank levy that President Obama is set to announce on Thursday will be based on the size of banksâ assets minus insured deposits and shareholder equity. In relative terms, the article notes this will benefit banks such as BofA (BAC), Wells Fargo (WFC), JPMorgan (JPM) and Citi (C), as these firms all have large insured deposits relative to their overall balance sheets. However, the paper adds that the levy will place a relatively large burden on investment banks such as Goldman Sachs (GS) and Morgan Stanley (MS), given that they do not have large insured deposit bases.
http://www.ft.com/cms/s/0/8bf7a9ba-0082-11df-b50b-00144feabdc0.html
As was reported earlier today by the WSJ, the FT cites people familiar with the situation who say that the bank levy that President Obama is set to announce on Thursday will be based on the size of banksâ assets minus insured deposits and shareholder equity. In relative terms, the article notes this will benefit banks such as BofA (BAC), Wells Fargo (WFC), JPMorgan (JPM) and Citi (C), as these firms all have large insured deposits relative to their overall balance sheets. However, the paper adds that the levy will place a relatively large burden on investment banks such as Goldman Sachs (GS) and Morgan Stanley (MS), given that they do not have large insured deposit bases.
New bank levy is an âinsurance premiumâ for unallowable-uninsured-debt financed assets, on too-big to fail banksâ balance sheets. Will they capture bank SIVs and other off balance sheet debt-financed assets too? The leaks of the bank levy plan (in FT) say it excludes equity (not leveraged) and FDIC (previously) insured deposits. You canât charge an insurance premium twice.
This Obama administration bank levy plan addresses the core problem of the meltdown in my view. As the meltdown got underway, every level of backstop failed. First, diversification of risk through packaged CDOs, then weak ratings and underwriting, undercapitalized insurance, weaker reinsurance, and finally the risk was concentrated at the Wizard of London Oz AIG Financial Products â a guarantor mirage writing swaps with any takers with a pulse and pocket book. There was no true back stop other than central banks and governments.
After TARP bailouts, like any smart Wall Streeter (which they have learned a lot about this past year), government now realizes it's true value as the back stop of last resort and it's now forging a proper formula and billing approach for this service. Yes, their price may be too high and their process too heavy handed, but they are probably they only counterparty with more power than Goldman Sachs itself.
If this bank levy insurance premium succeeds â and itâs too early to tell - banks will simply have a higher carrying cost for taking uninsured debt-financed asset positions. As always, there will be unintended consequences. Will that cause some banks to take even greater risk to pay for these additional position costs, and will it freeze others from these activities all together?
In Wall Street logic, how is this concept wrong? Itâs not a tax; itâs not a levy, its Superman getting his insurance premium.
The pundits and politicians have successfully (so far) re-branded a bank tax (tax increase), to bank levy (punishment), to bank insurance - on items that were uninsured yet came with a moral hazard government back stop.
Yes, government did get mostly paid back on TARP bailouts, but they did not get a Warren Buffet type Goldman-deal and certainly not a spectacular Wall Street type deal either.
Good for the government, they are collecting their share of the bonus loot too and hopefully this puts out all fires.
Read Freakonomics. A childrenâs school wanted parents to pick up children on time, so they passed a late fee charge. Parents figured they could pay the fee and come late and more were late. It had the reverse effect of what they wanted. Will banks skimp on risk management more going forward figuring they are paying good money for a government insurance plan? You have to wonder if the government is just scrambling in its own debt crisis and acting irrationally all together. What makes sense on one hand can cause problems on the other hand.
This Obama administration bank levy plan addresses the core problem of the meltdown in my view. As the meltdown got underway, every level of backstop failed. First, diversification of risk through packaged CDOs, then weak ratings and underwriting, undercapitalized insurance, weaker reinsurance, and finally the risk was concentrated at the Wizard of London Oz AIG Financial Products â a guarantor mirage writing swaps with any takers with a pulse and pocket book. There was no true back stop other than central banks and governments.
After TARP bailouts, like any smart Wall Streeter (which they have learned a lot about this past year), government now realizes it's true value as the back stop of last resort and it's now forging a proper formula and billing approach for this service. Yes, their price may be too high and their process too heavy handed, but they are probably they only counterparty with more power than Goldman Sachs itself.
If this bank levy insurance premium succeeds â and itâs too early to tell - banks will simply have a higher carrying cost for taking uninsured debt-financed asset positions. As always, there will be unintended consequences. Will that cause some banks to take even greater risk to pay for these additional position costs, and will it freeze others from these activities all together?
In Wall Street logic, how is this concept wrong? Itâs not a tax; itâs not a levy, its Superman getting his insurance premium.
The pundits and politicians have successfully (so far) re-branded a bank tax (tax increase), to bank levy (punishment), to bank insurance - on items that were uninsured yet came with a moral hazard government back stop.
Yes, government did get mostly paid back on TARP bailouts, but they did not get a Warren Buffet type Goldman-deal and certainly not a spectacular Wall Street type deal either.
Good for the government, they are collecting their share of the bonus loot too and hopefully this puts out all fires.
Read Freakonomics. A childrenâs school wanted parents to pick up children on time, so they passed a late fee charge. Parents figured they could pay the fee and come late and more were late. It had the reverse effect of what they wanted. Will banks skimp on risk management more going forward figuring they are paying good money for a government insurance plan? You have to wonder if the government is just scrambling in its own debt crisis and acting irrationally all together. What makes sense on one hand can cause problems on the other hand.
European commissioner for devellopment open to Tobin tax:
http://www.europarl.europa.eu/news/...IPR66988-08-01-2010-2010-false/default_en.htm
http://www.europarl.europa.eu/news/...IPR66988-08-01-2010-2010-false/default_en.htm
"Financial crisis responsibility fee"
http://www.politico.com/news/stories/0110/31489.html
"President Barack Obamaâs budget will include a fee on approximately 50 of the nationâs largest financial firms, collecting about $90 billion over 10 years, the White House revealed Wednesday night. The fee aims to recoup losses suffered by taxpayers from the financial system bailout."
"Only financial firms with more than $50 billion in assets qualify; their smaller and mid-size competitors would not pay the fee. Thus, big firms that pass on the fee âwill do so at the peril of losing market share and hurting their competitive position,â the senior administration official said."
"The fee would equal about 15 basis points of a firmâs qualifying liabilities, which would exclude deposits or reserves assessed by another regulator. The qualifying liabilities would be determined by the firmâs regulator, and the fee collected by the Internal Revenue Service."
"Under the legislative proposal being drafted by the administration, the fee would last a minimum of 10 years, but would extend longer if all TARP losses had not been covered. The Treasury Department believes that 10 years â and the $90 billion collected over that time period â should be enough to cover all TARP losses. But the presidentâs 2011 budget will include a projected TARP loss of $117 billion since the administration is using its most conservative estimates in that document."
-Guru
http://www.politico.com/news/stories/0110/31489.html
"President Barack Obamaâs budget will include a fee on approximately 50 of the nationâs largest financial firms, collecting about $90 billion over 10 years, the White House revealed Wednesday night. The fee aims to recoup losses suffered by taxpayers from the financial system bailout."
"Only financial firms with more than $50 billion in assets qualify; their smaller and mid-size competitors would not pay the fee. Thus, big firms that pass on the fee âwill do so at the peril of losing market share and hurting their competitive position,â the senior administration official said."
"The fee would equal about 15 basis points of a firmâs qualifying liabilities, which would exclude deposits or reserves assessed by another regulator. The qualifying liabilities would be determined by the firmâs regulator, and the fee collected by the Internal Revenue Service."
"Under the legislative proposal being drafted by the administration, the fee would last a minimum of 10 years, but would extend longer if all TARP losses had not been covered. The Treasury Department believes that 10 years â and the $90 billion collected over that time period â should be enough to cover all TARP losses. But the presidentâs 2011 budget will include a projected TARP loss of $117 billion since the administration is using its most conservative estimates in that document."
-Guru
Administration to propose tax on large banks to target risk-taking, bonuses:
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/13/AR2010011304195_pf.html
"The administration plans to include the proposed tax in the budget it delivers to Congress in February. What emerges from Congress, however, could be markedly different. Some members of both chambers already are calling for a more punitive tax. Proposals range from a 75 percent levy on bonuses to a toll on financial transactions."
This piece indicates that we could end up seeing something else once it goes through Congress - let's hope if that happens that it isn't the dreaded transaction tax (highly unlikely, IMHO)...
-Guru
http://www.washingtonpost.com/wp-dyn/content/article/2010/01/13/AR2010011304195_pf.html
"The administration plans to include the proposed tax in the budget it delivers to Congress in February. What emerges from Congress, however, could be markedly different. Some members of both chambers already are calling for a more punitive tax. Proposals range from a 75 percent levy on bonuses to a toll on financial transactions."
This piece indicates that we could end up seeing something else once it goes through Congress - let's hope if that happens that it isn't the dreaded transaction tax (highly unlikely, IMHO)...
-Guru
This is from one of my news services this morning:
TARP tax unlikely to gain approval in Senate, says FBR Capital
According to FBR's sources, the proposed TARP tax has a very low probability of passage in the Senate since nearly all Republicans and a number of Democrats would likely vote against the measure. However, FBR sees potential for headline risk since the proposal has a higher chance of passing in the House.
If this TARP tax can't even pass the Senate then there is no way a transaction tax ever will.
-Guru
the transaction tax will pass to satisfy main street's lust for blood . again the big banks and goldman will be spared as in exempted. the small retail trader will become the sacrificial lamb as the US congress goes fee crazy. it won't be called a transaction tax. it will be called a transaction fee to help rebuilt america.