Obama to Propose New Limits on Banks
http://online.wsj.com/article/SB10001424052748704320104575015910344117800.html?mod=googlenews_wsj
http://online.wsj.com/article/SB10001424052748704320104575015910344117800.html?mod=googlenews_wsj
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1/4% Tax on all stock trades pushed in NY Times today
- Thread starter seasideheights
- Start date
Quote from seasideheights:
Obama to Propose New Limits on Banks
http://online.wsj.com/article/SB10001424052748704320104575015910344117800.html?mod=googlenews_wsj
I added a Comment to both WSJ stories.
"Too small to compete" will replace "too big to fail" and it will require fixing in a few years. I recall in the 1990s seeing top 100 lists of banks around the world and US banks being on the bottom of the lists. Foreign banks dominated the lists and they did commercial banking, investment banking, insurance and other financial services. US banks were fractured and had trouble competing on the global stage.
Last week, I said yes to the WH bank fee plan - mostly to replace a much nastier financial-transaction tax - for the four reasons the WSJ used today to say the bank fee will probably pass. But the White House's politically-enhanced good intentions will probably go too far.
Morgan Stanley had disappointing earnings today. Why, because trading profits were down. Trading profits have saved our banks since the meltdown and generated the significant majority of their earnings. Not loans to fund business losses during downsizing. Banks need trading profits to cushion recession years and lending losses.
Trading is good, it's not bad. The banks biggest losses came from illiquid toxic asset positions on government-connected-enabled loans to sub prime real estate borrowers. Don't blame the meltdown on the trading desks.
Trading is getting a very bad rap in America and itâs unfair. Traders make wise decisions daily and they do not tie up money for the long-term with illiquid risks. Why are tax and other policies intended to tie up funds with risk?
Long-Term Capital, the hedge fund that caused the Asian contagion in the late 1990s, was too-big to fail as a trading hedge fund and I can understand why the regulators just donât want any of that type of risk on an insured-deposit bankâs balance sheet. But itâs like airplanes, the risk of an airplane crash is still far less than auto accidents. Stripping trading out of banks in a meaningful way is overreach. Hopefully, they wonât over do it.
The Fed gave banks easy money to lend and the banks were afraid to lend it so they traded it instead. How do you fix that problem? As the WH will suggest tomorrow, and with a bank fee, or otherwise? I suggest a little more patience for recovery, which is underway and for banks to gain proper confidence in lending. Forced lending policies from government led to some of these problems in the first place.
Quote from seasideheights:
"Transaction tax in the stock market - Even a quarter of a cent tax on trades could generate billions for the American people and slow some of the arbitrage and day-trading that poisons the financial system. This tax would not be felt by Main Street Americans but only by the elite who squeeze money out of the system through extremely rapid trading that games the system and does not create enduring value. "
http://www.huffingtonpost.com/stephen-h-dinan/get-out-of-bed-with-the-b_b_429943.html
COMMENT SECTION AT THE BOTTOM OF THAT PAGE.
Here's my comment, as submitted:
A transaction tax would, indeed, be felt by "Main Street" -- big time. How?
1) It would reduce the volume business done on the exchanges -- sharply -- thus making it substantially more expensive for individual investors to buy and sell stocks. In other words, that quarter percent tax would represent just the beginning of increased costs that the individual investor would bear.
2) It would drive assets to financial markets in countries that do not impose such taxes. This would reduce investment resources in the US and throw tens, and possibly hundreds, of thousands of people out of work.
3) Market makers -- e.g., the Wall Street pros supposedly the target of such a tax -- would likely be exempted from any transaction tax legislation that actually made it out of the tax-writing committees in Congress, which means that this so-called "tax on Wall Street" would, in fact, fall mostly on investors from, you guessed it, Main Street!
The financial crisis was not caused by the trading of stocks and derivatives on regulated exchanges. The real culprit was (and is) financial transactions that take place "over the counter" and under the table. Let's focus on bringing those transactions to the bright light of regulatory day. Let's make sure these transactions are handled on the world's most transparent, most liquid financial exchanges -- that's right, the ones here in the USA. In so doing, we'll bolster this country's economic competitiveness, and we'll eradicate a major economic risk factor -- the smart way.
This is the type of talk we have been waiting to see. The exhaustion by the public of the Wall Street bashing topic. It's the first article I've seen mention it. More will come. Hopefully soon.
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"There is a lot of anger at Wall Street and at the financial sector still in the electorate, regardless of improvements and reforms embraced by the industry," he said.
Although the rhetoric may not go away, it could be dialed back, said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland.
Morici said Obama and Democratic lawmakers will continue to rail against Wall Street for a while, but the theme may lose steam as the public turns its interest elsewhere.
"People are more upset about other things like co-pays on insurance," he said.
http://www.reuters.com/article/idUSTRE60J5DL20100120
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"There is a lot of anger at Wall Street and at the financial sector still in the electorate, regardless of improvements and reforms embraced by the industry," he said.
Although the rhetoric may not go away, it could be dialed back, said Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland.
Morici said Obama and Democratic lawmakers will continue to rail against Wall Street for a while, but the theme may lose steam as the public turns its interest elsewhere.
"People are more upset about other things like co-pays on insurance," he said.
http://www.reuters.com/article/idUSTRE60J5DL20100120
Quote from rsikit:
Guru,
What you stated is for the Conrad Gregg idea to from a commission which has not been looked upon favorably, the one people are talking about now is the defeicit commission formed by presidential orders by passing congress which will have rules seaside mentioned.
This piece mentions that you would need a super majority in both the house and senate under obama's deficit commission. At any rate you would need 14 out of 18 votes just to bring it to the floor of congress.
"This panel, which is to be composed of eight lawmakers from each party and a pair of White House emissaries (or maybe 12 members appointed by Congress and six by the White House) would in either case require 14 out of the 18 votes to send a proposal to Congress. From there, enacting any proposal would require a 60 percent supermajority of both the House and the Senate to send a bill to President Barack Obama's desk."
http://www.huffingtonpost.com/2010/01/20/white-house-embraces-poin_n_430378.html
-Guru
http://www.politico.com/news/stories/0110/31676.html
trying to add this comment to the site but won't work with iPhone. Will do tomorrow unless someone else can add it for me to sooner. Thanks
also this on tomorrow's announcement
http://www.politico.com/news/stories/0110/31769.html
Progressives calling for windfall profits tax on bankers and FTT too. Based on Dean Baker call to arms.
US progressives are probably really upset now and see their power and voice passing away. Their cohort President Obama is being pulled to the center as President and now with the Senator Brown election results. Are the progessives going to use the same play book at UK PM Brown and Labour in deflecting problems with attacks on bankers? They are pretty desperate too and their only solace was a politically-motivated attack on bankers too. The exodus of bankers set sail for the US and now they are resteering to Hong Kong and Switzerland. The progressives' political ploys towards bankers and anti-finance-business will not win over populists but rather enrage them with government over reach and retroactive tax attacks. A Financial transaction tax will put millions out of a job and lead to poorly priced markets hurting all investors, retirees, and farmers. Please listen to Secretary Geithner he is against these bad ideas.
trying to add this comment to the site but won't work with iPhone. Will do tomorrow unless someone else can add it for me to sooner. Thanks
also this on tomorrow's announcement
http://www.politico.com/news/stories/0110/31769.html
Progressives calling for windfall profits tax on bankers and FTT too. Based on Dean Baker call to arms.
US progressives are probably really upset now and see their power and voice passing away. Their cohort President Obama is being pulled to the center as President and now with the Senator Brown election results. Are the progessives going to use the same play book at UK PM Brown and Labour in deflecting problems with attacks on bankers? They are pretty desperate too and their only solace was a politically-motivated attack on bankers too. The exodus of bankers set sail for the US and now they are resteering to Hong Kong and Switzerland. The progressives' political ploys towards bankers and anti-finance-business will not win over populists but rather enrage them with government over reach and retroactive tax attacks. A Financial transaction tax will put millions out of a job and lead to poorly priced markets hurting all investors, retirees, and farmers. Please listen to Secretary Geithner he is against these bad ideas.
I notice he says, "Mr. DeFazio gives bonds a free pass, and gives futures and swaps a big break, taxing them at 0.02 percent (2 bps)"
wtf? "gives futures a big break", as if DeFazio is doing us a favour!
You'd think that 'Trader Magazine' would be on our side but this comment tells me this journalist has not traded.
Our problem is that when 'insiders' like Buffett, Cramer and 'Trader Magazine' say or write such comments the general public will believe them.
We need to fight harder against FTT...