US public 'will pay Obama’s $90bn bank levy’

[kpete]

Source: Telegraph UK


US public 'will pay Obama’s $90bn bank levy’
President Barack Obama's $90bn (£59.5bn) bank levy will largely be paid for by customers and investors and not the institutions themselves, the US's leading spending watchdog has found.


By James Quinn, US Business Editor
Published: 7:10PM GMT 05 Mar 2010

In a report on the White House's plan to impose a 0.15pc fee on liabilities of banks with more than $50bn in assets in order to recoup money lost through the $700bn Troubled Assets Relief Programme, the Congressional Budget Office (CBO) said the impact on banks would be "small".

"The cost of the proposed fee would ultimately be borne to varying degrees by an institution's customers, employees and investors, but the precise incidence among those groups is uncertain," said the CBO in a letter to Senator Charles Grassley, a leading member of the Senate finance committee.


The CBO went on to say that customers could face higher rates for borrowing and increased charges, while investors could face lower share prices. It added that employees may receive less compensation as banks attempt to pass on the fee.

The levy, which has yet to be legislated for, was intended to make major banks – not taxpayers - pay for state assistance throughout the financial crisis.

Read more: http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7378662/US-public-will-pay-Obamas-90bn-bank-levy.html

[Alias Dictus Tyrant]

1. This is surprising? n/t

[hughee99]

2. So the banks will pass all this money off on the consumers

and investors and WE, not the banks, will pay the fees. And if they don't pass off the costs to the consumers (although I'm sure they will), then they'll have to take the money out of their own assets, which means they'll have less money available to lend at a time when the government is also trying to encourage them to lend more.

[FreakinDJ]

19. Why does that sound "So Rush LimpDick"

"Never Tax Corporations - the consumers pay the Tax"

Yet everyone here understands Taxing Corporations that outsource jobs would increase tax revenues buy putting more Americans to work - "So is that a Tax on Working Class?"

Or is Jobs for Americas Working Class

Hate to say it but Rush LickBalls relies on half truths and bigotry for his flawed logic and editorial opinions

[hughee99]

21. Explain to me, then, where the money comes from?

As far as I can tell, either the bank passes on the costs, or it comes from the banks profits. If it passes on the costs, consumers and investors pay for it via higher fees or lower dividends. If it comes from profits, they have less available money to lend.

Is there some third place this money could come from?

[FreakinDJ]

23. Banks have been making record profits

and the new requirements instituted by the Obama administration are forcing Banks to hold more cash reserves.

Just how this plays out will depend on the market conditions but to parrot Rush LickBalls talking points is rather short sighted and ignorant. Charging those responsible (Banks) fees and using it to pay down the debt reduces the interest payment on the National Debt which we all pay with our taxes.

[hughee99]

36. I don't know what the F' Limpballs says

But you did manage not to address my question at all. If he says water is wet, that doesn't automatically make it wrong (although I'd agree it would make it more suspect)

The banks can either cut profits (which they've shown a willingness to jump through virtually any hoop to avoid) or pass on the costs (which they've shown a willingness to do at the slightest provocation). What the government plans to do with the money is irrelevant to my point, unless you want to argue that although the people will pay the cost, it will even out when the government uses it to pay down the national debt.

[AngryAmish]

38. Give it up

...both get dirty and the pig likes it...

[FreakinDJ]

40. Been reading very long - Or just listening to Rush LimpDick

Your question was answered however it wasn't the answer you wanted

You wanted me to join in with you Bashing Obama. It might come as a surprise to you but Being Black while serving as the President of the United States is NOT a Crime, nor does it preclude him from having a more intelligent approach to solving the country's problems then the average RATpubliCON

However - if you find yourself having difficulty keeping up or understanding, then I suggest you ask some one to explain it to you

[hughee99]

42. Ah, so your answer to where the money comes from

is "the banks record profits" despite their substantial track record of passing their costs on to the consumer.

And while it doesn't come as a surprise to me that "Being Black while serving as the President of the United States is NOT a Crime", it may come as a surprise to you that being black while serving as president doesn't make one infallible either.

I didn't vote for Obama because I thought he was perfect, but I thought (and think) he'll do a very good job. When I think he's making a mistake, or not handling something very well, I'm going to say so.

It's always easier to imply racism or suggest that someone is just parroting RW talking points, but it's never an effective argument. Condescension doesn't work well either. If you find that difficult to understand, feel free to take your head out of your ass and look into it.

[FreakinDJ]

44. 20 Economist can prove you wrong and you'll still parot Rush Limpdick

If you assumption (and Rush LickBall talking point) was correct we would be paying $20 a gal of gas. Consumers have a choice and if they don't like the fees they'll simply move their business else where.

As for taxation :aka "Fees", being universal applying to all banks the Rush Limpdick line of thought as that they are automatically passed on to the consumer. That would be WRONG

Walmart, set precedence by winning a SCOTUS decision repealing the anti-trust laws that prohibited selling products at a loss. In fact Walmart (and many others) sell many products and services at a loss to lure shoppers through the doors. Some folks may thing it unfair - but then again Walmart is the largest retailer in the world. Banks would have the choice to pass on the fees or to absorb the cost to lure in more customers/deposits - given Banks are now being required to securitize the loans they make, I'll gauruntee you they'll use a methodology that ensures increased deposits.

As for fees/taxation. Corporate Taxes is our Federal Government's method of directing Corporate America. By creating Tax incentives to offshore manufacturing the Bush Administration destroyed American Manufacturing. If the Obama Administration were to place a "Transfer Fee of Stock Transactions" (as most Western Countries do) they would reduce market manipulation and encourage "True Capitalism" through honest investment.

So even IF the Fees or Taxes are higher the end result such as lower cost/better return realizes an increase in income/return.

This has been you lesson in the Fallacy of RATpubliCON Trickle Down Economics.

Short Term Profits with Long Term Consequences is what has driven this country into Bankruptcy. Now when we have a President with convictions strong enough make the tough choices you start parroting Rush Limpdick - I guess I expected better from the readers of DU

At least a significantly more intelligent Freeptard Disruptors.

[hughee99]

46. Hey, is this something resembling an actual argument?

"If you assumption (and Rush LickBall talking point) was correct we would be paying $20 a gal of gas. Consumers have a choice and if they don't like the fees they'll simply move their business else where."

Why would we be paying $20 for gas? When taxes go up, the price of gas goes up. When the cost of producing gasoline goes up, the price goes up. That happens now, the cost is passed on. When the price of gas was at its highest, corporate profits were at their highest. The cost was being passed on.

"Walmart, set precedence by winning a SCOTUS decision repealing the anti-trust laws that prohibited selling products at a loss. In fact Walmart (and many others) sell many products and services at a loss to lure shoppers through the doors. Some folks may thing it unfair - but then again Walmart is the largest retailer in the world. Banks would have the choice to pass on the fees or to absorb the cost to lure in more customers/deposits - given Banks are now being required to securitize the loans they make, I'll gauruntee you they'll use a methodology that ensures increased deposits."

Banks would have the choice to pass on or absorb the fees? The have that option now and yet as you've pointed out, the banks are making "record profits" and while bank fees are quite high. You're suggesting that something would happen in the future, but there's not much evidence it's happening now. What specifically will THIS policy change in the mentality of the bank? Are you actually suggesting banks are going to loan money at a loss?

"As for fees/taxation. Corporate Taxes is our Federal Government's method of directing Corporate America. By creating Tax incentives to offshore manufacturing the Bush Administration destroyed American Manufacturing. If the Obama Administration were to place a "Transfer Fee of Stock Transactions" (as most Western Countries do) they would reduce market manipulation and encourage "True Capitalism" through honest investment."

Good suggestion, I have yet to see anyone in power actually suggest this, though. As it is, it's irrelevant to your argument because it has exactly nothing to do with banks passing fees onto customers. If market manipulation is eliminated completely, banks can still pass costs onto the consumer.

And by the way, if fallacies are your thing, "20 Economist can prove you wrong and you'll still parot Rush Limpdick" contains 2 logical fallacies, Appeal to authority (http://www.logicalfallacies.info/relevance/appeals/appeal-to-authority/) and Genetic Fallacy (http://www.logicalfallacies.info/relevance/genetic/)

An actual argument? Never mind, I had high hopes though. Well, you've taken 4 cracks at this and have yet to given anything related to a valid argument as to why the banks won't pass on the costs to the consumers. You have added exactly as much to the discussion on this as the man you clearly spend a great deal of time listening to on the radio.

[FreakinDJ]

47. Can't you do any better then FreepTard talking points

You think you are impressing anyone

Try going over to the other website - I'm sure you'll be received a whole lot better there

[hughee99]

48. I don't know if my argument is "freeptard talking points" or not

but I do know you haven't impressed anyone with your ability to dispute them. At least others are making an argument and eventually may convince me that I'm wrong. All you have done is show your inability make a rational argument, which I find difficult to believe since, if they are talking points, you must have been able to find dozens of links to some intelligent analysis on this. I can see, failing your own ability to argue your point, you've decided to go with the personal attack route rather than other way.

Bye, bye.

[FreakinDJ]

50. Your arguments are straight from Rush LickBalls lips

In other words "Half Truths and Pure Distortions"

There is no discussion

[mbperrin]

24. It comes from the bank profits. Cannot come from higher fees, or they

would already be charging higher fees. Even in an oligopoly, firms do not have the ability to raise prices at whim. They are constrained by the price-taking or price-making strategy of their competitors, as well as the ability of the customer to find acceptable substitutes at higher prices.

So bank profits will be lower and they will be less attractive to investors, as they should be. The bubble formed by excess lending is what has caused the dire straits now, and preventing the re-forming of that bubble is the correct action. There SHOULD be fewer loans taken; there SHOULD be more attractive places to put capital than in artificial creatures like banks. Interest is a charge against future resources, and the more we take now, the less there will be later.

We are destroying the flexibility and innovation we will need to face an uncertain future, so the more things conspire to put us on a cash or current basis, the better. The only thing wrong with this tax is that it is so tiny. I'd say 1,000 times higher would be better, and if 3/4 of the banks ceased operation, as well as 3/4 of the lending, good. Mission accomplished. (Really.)

[hughee99]

35. You are mistaken

They can't raise fees to cover expenses that only they have, but they can raise fees when everyone in the industry has the same costs go up. They don't become less competitive because their competitors have to come up with the same money.

[mbperrin]

39. No, if your analysis were correct, then every company in an industry could

also give huge raises across the boards to all employees and then recoup them through higher prices to their customers. They don't do that, because of the relative inelastic or elastic demand for their products.

Substitutions take place when the primary desired product or service becomes too expensive. This is what happened to the whale oil industry in the 1860s, which created the petroleum industry.

As prices rise, consumers will switch to other venues for banking type services, or choose to exit banking completely. I haven't had a bank account or a loan from a bank or other financial institution from 1978, just as an example.

Price making and price taking behaviors, to which you refer, do not guarantee that consumers will swallow new higher prices at the same rate; in fact, they certainly won't, not as long as demand curves slope in a negative direction, which they do.

[hughee99]

43. They don't do that because they're not all REQUIRED to do it.

If one company doesn't play along they'll have lower prices and take market share. Yes, increased prices may result in substitution where applicable, but what is the "substitute" for the banking industry, coffee cans and loan sharks?

[mbperrin]

45. I haven't used a bank for any purpose since 1978, and I haven't dealt with

either coffee cans or loan sharks.

First, and most preferred: save until you can buy. Not only will you save the huge burden of interest, you can often receive discounts for cash in hand, because uncertainty over completion of the transaction is eliminated.

Second, have the seller finance it themselves. If they receive cash, what will they do? Put it in a bank at 2 or 3% interest? By having the seller finance it, the seller will receive 7% (our current offer), all the nonsense and nuisance charges are eliminated at closing, and closing can be done quickly. We buy small apartment complexes (24 or fewer units) and houses of 2-4 bedrooms and rent them out after renovation. All are paid for, none were financed through a bank or other conventional lender. Cash flow is immediate, because of all the fees that were not required, along with a down payment. That money is used as a renovation pool, and units are rented as soon as ready. We take one tenant in each complex as a manager for the physical side, and they receive free rent, no cash or other money, for those services. On houses, we run each of them directly. We were in construction and remodeling for 15 years previously, so we do all our own renovation work.

Third, all cash (aside from the relatively little needed for current flow requirements) is plowed into additional real acquisitions which either show a return or save cash, like small boutiques located in smaller tourist towns, windpower generators, college degrees, and the like.

Your money belongs to you. Manage it and reap the rewards. Let someone else manage it, and they take their cut first. If their cut exceeds any profits, your capital diminishes. If they lose it, it's gone, and if they steal it, it's gone again.

I worked for banks for a decade from the late 60s to the late 70s, and that gave me all the information I needed about banks. Never have looked back, and while we are certainly far from wealthy, we are comfortable, have time and resources for our children, grandchildren, and one new great-grandchild. We all travel and have time to do it.

So get that elephant off your back and help yourself. You'll be surprised at the opportunities out there, and the other thing I haven not mentioned? It's fun, and it feels good to know that any worries you have are under your personal care and control. Anything that happens, good or bad, you had a part in, and you weren't just a spectator at your own life.

[No Elephants]

25. What's the problem with lowering dividends and executive compensation?

[hughee99]

34. No problem at all with cutting executive compensation

I just don't think they're going to do that. As for lowing dividends, though, that hurts investors. While it makes it easier to believe that all bank investors are summering in the Hamptons, a lot of them are retirement and pension plans owned by regular people.

[AllentownJake]

3. Jail is the only thing these people understand. nt

[Sherman A1]

4. I have another idea, but

it is far less dainty and involves Gitmo.

[atreides1]

7. I have the same idea

only my doesn't involve Gitmo, just twenty thousand feet of water.

[Jakes Progress]

5. Did anyone think rich people would have to suffer anything?

Pshaw!

[liberation]

17. They had to give up one of the 10 vacation homes, and the new mercedes will have to wait 3 months

It is hell for them, let me tell you.... us poor people have it easy.

Do you know how tough is it to have to chose between 9 vacation homes and not the expected 10? Do you know what their neighbors must be thinking seeing them driving an 09 mercedes, rather than the new 10 models with the extra leader stitch which everyone else in the street have? Of course you don't know how it feels, because you haven't experience that particular hell.... count yourselves lucky poor people!

[HughMoran]

6. Guess we should stop all fines on companies for violating any number of laws

:shrug:

The article and CBO aren't saying anything that a 1st grader couldn't deduce. What. The. Fuck?

[skids]

12. More bull from the "Obama ca do no right" crowd...

Not all banks that offer consumer products are subject to these fees, because not all of them have huge trading operations.

So yeah, the banks that pay these fees CAN try to pass the cost on, but they will have to do so in a competitive market with other institutions that do not have to. That will make their products less attractive compared to their competitors.

One wonders if they are so blase about passing these costs o why they are spending so much lobbying against them. I guess they'll just pass the cost of those lobbyists on, too.

EDITED TO ADD: Move your money. This week.

[No Elephants]

26. Either that, or have the laws place conditions. Or make more officers personally liable, without

ability on the part of the fined corporation to idemnify. The argument will be that no one will serve as an officer or director then. I don't buy it.

[Abq_Sarah]

8. Well, duh!

When state, local or the federal government imposes a tax on my business, it's passed through to the customer. I'm sure as hell not going to make my employees pay for it.

[sulphurdunn]

9. If this scam didn't break you heart,

or piss you off, it'd make you bust a gut.
"The CBO also said the levy could also backfire by reducing the supply of credit." What supply of credit? :cry: :mad: :rofl:

[inna]

10. This is just maddening.

Launching the plan in January , President Obama said: "I'd suggest you might want to consider simply meeting your responsibilities and I'd urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill, but by rolling back bonuses for top earners and executives."

You think they are going to "listen" to that "suggestion"?...

:banghead:

[followthemoney]

11. The top 1% are getting richer and everyone else is making do

with less.

There is a solution to this problem. Set the top income tax rate to 70% or 90%.

Put an end to the Republican policy of Borrow and Spend.

[fascisthunter]

13. he can forget about counting on millions of votes next election

he's done

[Lagomorph]

14. Of course we will.

That's how finances work. They add up their costs, and enough of a markup to justify the financial effort and pass the price on to the customers.

It's that other $100 trillion in current and future liabilities that I'm worried about.

[Moosepoop]

15. Wow -- sounds bad, doesn't it?

Especially the headline. But actually reading the letter from the CBO to Grassley sheds some light on all those "coulds" in the article.

http://www.cbo.gov/ftpdocs/110xx/doc11046/03-04-Ltr_to_Grassley_on_FCRF.pdf

The Congressional Budget Office (CBO) is working with the staff of the Joint
Committee on Taxation (JCT) to analyze the proposal. Although the
Administration has laid out the broad outlines of the proposal, it has not specified
how comprehensive the definitions of assets and liabilities would be for the
purpose of assessing the fee. Those definitions would affect which institutions
were covered, how institutions would react to the fee, and what its incidence
would be.

In other words, they don't have the actual proposal yet, so they're guessing as best they can with what they have.

Who would pay the fee?

Preliminary estimates by JCT identified approximately 60 bank holding and
insurance companies with assets in excess of the $50 billion threshold, which
include most of the institutions that are likely to pay the fee. A small number of
very large firms would account for most of the payments. However, the ultimate
cost of a tax or fee is not necessarily borne by the entity that writes the check to
the government. The cost of the proposed fee would ultimately be borne to
varying degrees by an institution’s customers, employees, and investors, but the
precise incidence among those groups is uncertain. Customers would probably
absorb some of the cost in the form of higher borrowing rates and other charges,
although competition from financial institutions not subject to the fee would limit
the extent to which the cost could be passed through to borrowers. Employees
might bear some of the cost by accepting some reduction in their compensation,
including income from bonuses, if they did not have better employment
opportunities available to them. Investors could bear some of the cost in the form
of lower prices of their stock if the fee reduced the institution’s future profits.

That's a whole lot of "probably," "could," "might," "some," and "if" there, nowhere near the declarative statement made in the article's heading.

What would be the impact of the fee on the stability of financial institutions and future government outlays to cover future losses?

In general, the effect of a 0.15 percent fee would be small because the fee is
small—for instance, it represents a small fraction of the rate charged on an
average bank loan to businesses, which currently is in excess of 3 percent.
Because the proposed fee does not appear to be high enough to cause financial
institutions to significantly change their financial structures or activities, it would
not have a significant impact on the stability of financial institutions or significantly alter the risk that government outlays will be needed to cover future losses.

Ah, so the "small" impact that the fee would have on the banks that the article spoke of was on the future STABILITY of the institutions. Their stability was the whole point of the TARP program, so a small (insignificant, actually) effect on their stability is not a bad thing. Most likely not what Grassley was hoping to hear.

[kristopher]

16. This offsets some of the competitive advantage these particular banks have due to size.

It makes their services more expensive and thus makes local, smaller institutions more competitive.

[truedelphi]

18. That would be true except the Big Banks really call all the shots with regards to

Legislation. Most of the time, anyway.

So right now, the Big Boys of the banking world have gotten legislation passed that requires that banks pay their FDIC insurance payments ahead of schedule. It doesn't affect the Big Banks - after all they have hidden away so much of the Public's Bailout Monies that they could probably buy the FDIC is they wanted to.

But it will certainly hurt the small banks. Once they pony up the advance payments on their FDIC insurance, they will have far less capital to use to make loans to customers.

So then they will fail, and then they will be bought up by the Big Boys, and guess what! The big bank will be allowed to be credited for the advance payments that the smaller bank has made.

Life is just so good for th Upper One Percent.

[kristopher]

22. That has nothing to do with the false assertion in the OP

[sendero]

20. Simple solution...

... DON'T DO BUSINESS WITH THESE BANKS.

[No Elephants]

27. Supposedly, 9% of Americans have moved their accounts. Just be sure that the institution to which

you switch your business is worthy of it. Not every credit union or community bank is worthy. Check it out first.

I like that Massachusetts is looking into moving its accounts, too. Put pressure on your states, cities and towns to do the same.

[hollowdweller]

28. Competition will keep consumer prices down.

If banks try to raise their fees or interest rates then consumers will move their money to banks that keep them low in hopes of balancing out the added expense by attracting more consumers.

If there is actually competition for consumers then not all costs are passed to consumers. Republicans seem to forget any aspect of economics or business except trickle down.

[warm regards]

29. The end user always pays the tax. There is nothing new about this.

Taxes are a direct cost of doing business.

[hollowdweller]

31. That's what they would LIKE us to accept

But it's not always true.

[warm regards]

32. Clearly, you are unfamiliar with business accounting procedures.

It is always true.

[pampango]

30. Sounds like to ol' RW-"Corporations don't pay taxes. They just pass them on, so don't tax them." n/t

[kirby]

33. US Public pays for excessive CEO salaries...

Isn't this the case which just about anything? It gets passed onto the consumer.

That was part of our problem, money was too cheap. Interest rates need to be higher so that 'flipping' houses for a quick profit becomes too expensive, but investing long-term pays off.

[hayu_lol]

37. Why is anyone surprised?

After all, the taxpayers paid for Neil Bush and Silverado along with McCain/'Keating Five' in the S&L bailout.

Time to make credit card interest tax deductible...that would help the economy.

[sendero]

41. Don't do business..

.... with these banks. Problem solved.

[wishlist]

49. But customers have many options to go elsewhere for better rates than these big banks

We consumers have many options of places to borrow from and save with and don't need to do business with an institution that passes on such a tax by paying out low interest, charging high fees and high interest on loans.
I fully support the tax on those institutions that were bailed out.

[TomCADem]

51. So, We Should Adopt Trickle Down Economics? Tax Cuts To The Rich?

Because if they will pass a tax raise to consumers, which is bad, then I guess we should cut taxes to the richest people. That really worked out well under Bush!