Is This Change We Can Believe In?

President Obama announced a new 'fee' or tax on possibly 50 of the largest financial conglomerates. Are they finally getting it? We will see. I admit I was very skeptical of this notion when the White House first floated this idea a few days ago. After all they have a good track record with protecting the financial oligarchy. Was this more of the same? Possible not. The administration is calling this tax a fee: “financial crisis responsibility fee”. Boy, that name is dripping with spin. Name aside, on paper this tax may actually work. Here are some of the details from Treasury Department Fact Sheet:

  • Require the Financial Sector to Pay Back For the Extraordinary Benefits Received

  • Responsibility Fee Would Remain in Place for 10 Years or Longer if Necessary to Fully Pay Back TARP

  • Raise Up to $117 Billion to Repay Projected Cost of TARP

  • President Obama is Fulfilling His Commitment to Provide a Plan for Taxpayer Repayment Three Years Earlier Than Required

  • Apply to the Largest and Most Highly Levered Firms

More details of this financial crisis responsibility fee will be included in the President's next budget but here is a sketch of how it may work (as proposed):

  • The fee would apply to financial conglomerates with over $50 billion in consolidated assets

  • The fee would cover Goldman Sachs

  • The fee is assessed at .15% of "Covered Liabilities" per year

  • Covered liability = Assets - Tier 1 capital - FDIC-assessed deposits (and/or insurance policy reserves, as appropriate)

Based on the definition of Covered Liability, this fee will have a much bigger impact on financial conglomerates that don't have much of a deposit base such as Goldman Sachs and Morgan Stanley (notice it subtracts FDIC-assessed deposits). IMO, this where the design of this tax is very interesting. This tax is targeting and taxing more risky behavior such as trading/investment banking. The devil is in the details which we wait for and who knows what will come of this once it goes through the sausage grinder. One more very important thing, as Simon Johnson points out this morning: this tax is just a start and not an end. "Too big to fail" will still exist. This tax doesn't address TBTF.

Update:

Here is an example from the Treasury Dept. Press Release:

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good job

Submitted by on

I didn't write it up yet but if Obama actually put together a proposal that is useful and effective, yippie! (I didn't even look at this as a priority because I'm so much expecting useless fluff and stuff to feed the Zombie pigs).

I'll go look at it later and see if it's worth a damn.

Isn't that sad, you see a press release from the government and just assume it's more corporate welfare BS that's just for show so badly, you do not even read the proposal?

(oops).

FYI: I updated the story

to include the example from the press release.

RebelCapitalist.com - Financial Information for the Rest of Us.

RebelCapitalist.com - Financial Information for the Rest of Us.

Financial oligarchy is crying already

because it is being reported that Chase and BofA may be liable for $1.5 billion each under this fee/tax plan. Boo hoo.

“It’s not a good use of the president’s time to demonize banks or investment banks or hedge funds or any financial institution,” said Bruce Foerster, president of South Beach Capital Markets in Miami and a former executive at Lehman Brothers Holdings Inc., the now-bankrupt securities firm. “Trying to exact this last piece of flesh from the banks is the act of a politician, not the act of the president of the United States.”

Hey buddy, this President is the only thing standing between you and pitchforks. The financial sector is essentially insolvent many financial conglomerates should have been nationalized and recapitalized a long time ago but no instead the policy was to preserve equity and bond holders.

And here come the threats from the U.S. Chamber of Commerce:

A tax “may restrict the liquidity needed by small businesses to fuel job creation and economic growth,” R. Bruce Josten, the chamber’s top lobbyist, said in the letter. “Such unintended consequences may cost the government more than it hopes to raise with the imposition of such a levy.”

Oh, can someone tell this jack ass that banks are not providing any liquidity now after the largest bailout in U.S. history and NO tax. I take the money and if we have to funnel it back out to small businesses directly through an existing gov't agency such as SBA.

RebelCapitalist.com - Financial Information for the Rest of Us.

RebelCapitalist.com - Financial Information for the Rest of Us.

Don't believe the bullsh*t

Financial oligarchy are making their veiled threats over this fee. You know that this will crash the economy, that this limit lending, that small businesses will be hurt. Blah. Blah.

1) I saw a number of 4% reduction in lending - so what - do we need all this debt now and see #3.

2) As for small business lending, give me a break, the 50 or so financial conglomerates hit be this went hog wild in the housing sector and left the small business lending to smaller institutions.

3) One word - competition - we have thousands of other smaller institutions including credit unions that can fill any potential hole.

Don't believe the bullshit!

RebelCapitalist.com - Financial Information for the Rest of Us.

RebelCapitalist.com - Financial Information for the Rest of Us.

IMHO lobbyists

Submitted by on

Corporations fight tooth and nail anything, even when it really won't affect them long term. I mean even the most trivial, such as say on pay, which was only for show, just a shareholder non-binding vote, which isn't going to do jack shit, financial lobbyists spend millions trying to defeat it anyway.

This isn't that big of any effect, I mean it's better than nothing but for the public it's crumbs and of course the financial lobbyists are trying to fight it anyway.