CBS News: President Obama prepares $ 120 billion levy on banks

[grantcart]

http://www.cbsnews.com/stories/2010/01/13/politics/main6089969.shtml



AP) President Barack Obama plans to announce a new fee Thursday on the country's biggest financial firms to recover up to $120 billion in taxpayers' money used to prop up corporations during the economic crisis, a senior administration official said.

In proposing a multiyear levy on big banks, Obama is targeting an industry whose political deafness has vexed his administration. Banks once threatened by the undertow of a Wall Street collapse are now posting profits and proposing robust bonuses for their executives.

The official who described the administration's plans was not authorized to discuss the fee publicly and spoke only on condition of anonymity.

The $120 billion recovery goal is the most that administration officials expect to lose from the government's $700 billion Troubled Asset Relief Program that bailed out banks, automakers and other financial firms.

Most of the TARP losses are expected to come from auto industry rescues and the bailout of insurance conglomerate American International Group Inc.

[begin_within]

1. Any bets on how long until we read the headline, "Obama backs away from levy on banks"

[DrToast]

5. If so, he was never for it anyway.

Actually, this could be a good wedge issue. Let's see the Republicans block this.

[levander]

58. So tired of people making excuses for Democrats

Look, Democrats have 60 seats in the Senate. If they can't get this through, it's all on the Democrats.

That was what flustered me so much when the Republicans were in control. They did nothing about health care, and any time they tried they just cried and whined that, "those Democrats filibustered!". Look, reality is reality. If they needed a few Democratic votes, they should have gone and gotten them. Cut whatever compromise you can and get something done.

And now, the Democrats don't even need any Republican votes, but we still got people running around and blaming the Republicans.

For christ sakes! Stop making excuses. Just get something done!

[NavyMom]

6. This levy is actually part of TARP, it states if any funds are lost

then the banks MUST make up the difference since they are the reason the government needed to step in. I think Frank and Schumer added this to the bill to ensure taxpayers were paid back every single dime within 5 years of the TARP passing.

[Phx_Dem]

38. If he does NOT do something you dislike, you spin what he does do to make

it into something you would dislike (if he actually did it).

That's what I call myopic and pathetic.

[LoZoccolo]

61. And then you have to ask yourself, why would a politician court people...

...who are never going to be satisfied with him? These people who bash Obama are making themselves too expensive and still wonder why they don't get everything they want.

[TheKentuckian]

2. Hey, Obama! How about dealing with too big to fail, regulation, oversight, enforcement,

ending "heads I win, tails the taxpayer losses", and punishing behavior that creates systemic risk by hitting the big wigs with some serious taxation instead of some bogus window dressing/stalling.

You ran out the clock last year and now you've got some weak kneed crap that they'll pay right out of the US treasury or off their scammy fees.

This guy absolutely intends to do nothing about the financial sector at all. He'll scow and wag his finger all the way to another crash and once again step in to save the system.

Dealing with the corporate commies would have crazy strong support from the people, he could at least use the bully pulpit to force some action on this front but clearly he refuses to do squat and is just Wall Street's piss boy. That 120 billion over 10 years will sure learn 'em!

[ima_sinnic]

10. +++10000 yes, "regulation, oversight, enforcement," and TAXATION, please!

[phleshdef]

16. There is new financial regulation being worked out in Congress right now but don't let that stop you

[Cha]

3. They really are doing

an amazing job of getting us out of the last 8 years of abuse and abandonment.

[Patchuli]

4. You better, you better, you bet Pres Obama! nt

[GreenTea]

7. Do as many others and move your money out of those big banks & help your local community banks.

[cliffordu]

8. I believe this is good news. I don't know WHAT the fuck

some of the above posers, I mean posters are complaining about.

Oh, yeaah...

Some just hate him.

:shrug:


K&R

[Hekate]

9. What you said. It looks like good news all right. nt

[Clio the Leo]

11. I think they also just like to complain.

;)

[rebel with a cause]

62. I like to complain....

Just ask my kids. :hi:

These are just haters from way back.

[firedupdem]

12. +1 n/t

[goclark]

14. +1 and the 25th R

[rufus dog]

20. good post Grantcart

Amazing isn't it. Exactly like the Repukes, some are going to BITCH about every friggin thing he does.

[phleshdef]

24. Most of them are complaining and then suggesting he does almost the exact same thing.

[uponit7771]

40. Yeap, pony people come out in force no matter what the news

[grantcart]

50. there also seems to be a competition in seeing who can be the most cynical the fastest.

[cliffordu]

52. Yeah, but I always win, don't I??

[Vinnie From Indy]

13. LOL!

I am becoming tired of the ridiculously transparent BS coming from this White House. The Obama Admin AND the titans of Wall Street are playing Americans for fools once again. This is all just more Kabuki Theater designed to confuse and distract Americans from the obscene amounts of money being given away as bonuses this year on Wall Street. The President and the Wall Street firms are not stupid about all things. They knew that when they were going to dole out these gargantuan sums of money as bonuses this year there would be a backlash and they prepared for that with what you see here being proposed by Obama. It's a fucking scam people!

This "levy" of 120 billion will effect these "banks" not at all. In fact, they are laughing at us all right now. This levy is actually ANOTHER tax on you!!! All of these taxes, if enacted, will simply be passed directly on to the American public.

If Obama were serious about cracking down on Wall Street abuses, he would have done what European countries have done and aimed the taxes at the bankers themselves and not their institutions. England, France and others are taxing the obscene bonuses of the top executives and not the banks themselves.

Also, this announcement is purely a timed political distraction making it SEEM as though something is being done by the Obama Admin. The Obama folks and Wall Street knew that they would have to throw some bit of red meat to the masses to counter the growing outrage against Wall Street's insatiable greed and criminality. Both parties simply came up with another good ol' piece of political bait & switch and they will declare this is a victory and a blow against "fat cat" bankers. It isn't by a longshot.

Lastly, another poster has it exactly right when they offer that REAL reform on Wall Street would be the breaking up of these banks and the re-regulation of trading activities.

I weep for America! We are being played once again! The audacity of PT Barnum is more like it!

[Hamlette]

18. if we tax their bonuses, they will pay themselves bigger bonuses

if you analyze this from a tax policy perspective, when you tax the bankers "themselves" (by which I assume you mean taxing their large salaries and bonuses) they just pay themselves larger salaries and bonuses and pass the difference on to you, the consumer.

If you again, analyze this from a tax policy perspective, you have to tax in such a way as to incentivize moral behavior. Like taxing high volume trading which feeds the bubble/burst cycle which caused the last two banking crashes. Since the profit is small from high volume trading, a tax could put an end to it.

Tax policy can't be based on revenge alone. Smart ppl will figure out a way around it.

[phleshdef]

19. You are right. The government should never tax, levy or charge any corporation any fee ever again.

Because they might just pass it onto consumers.

Thats EXACTLY your logic there.

[Imajika]

15. Those levies will just be passed on to the consumer...

Every nickel of this will be passed right along to the customers in the form of higher fees.

You want to punish big banks and tone deaf executives, you have to increase their taxes, close loopholes for them as individuals, etc, etc.

The banks will put up a fight for show just to make any kind of new fee, tax or regulation as painful as possible for ANY administration to pass (just in case one comes along they truly oppose), but in reality, this sort of thing only makes the cost of banking higher for the consumer.

People never seem to understand that most taxes on business and/or corporations are just passed directly on to us. The "company" doesn't lose a thing. If a higher tax means their revenue might go down, why they just fire workers, cut salaries or raise costs to the consumer.

[phleshdef]

17. Increase their taxes, it will just be passed onto consumers.

You damn people just throw out blanket talking points without even fucking thinking about what you are saying.

[Hamlette]

21. yes, but consumers can go elsewhere

if banks pass taxes on to us, we'll move to credit unions which are not taxed. (Then of course credit unions will start paying the big bonuses and we start all over).

There is a way to design tax policy that gives us revenge and incentivizes moral choice on the part of the bank.

Taxing the CEOs does not do that. We need to tax the risky behavior.

[phleshdef]

23. Bullshit, it doesn't matter what you tax. And consumers can go elsewhere either way.

Companies will try to find ways to pay for fees, no matter what form those fees come in. They will attempt to pass it onto the consumer if they have to, regardless of whether its a levy or a profit tax or what have you. And consumers can move on, regardless of how they pass it on. You are complaining just to be complaining and basically calling for the same thing that you are complaining about.

[Imajika]

25. I am saying we should tax the individuals...

Higher taxes on individuals are the way to go here, not taxes on the bank itself.

A bank is expected by it's shareholders to make X amount of profit. If they suddenly have to pay more to the government, they just pass the cost on to the consumer. If they feel they can't pass it on to the consumer for fear they can't compete, they pass less on to the consumer and fire staff, cut salaries, curtail benefits, etc.

You want to go after the people making these obscene bonuses, not give them ways to defer all the costs/penalties on to the average worker or customer.

[phleshdef]

27. And since those individuals control bank policies, they will pass their tax onto the consumer.

Its NO DIFFERENT.

[Imajika]

32. No, you are incorrect...

Taxes on individuals are less likely to be passed, at least in full, on to the consumer.

Taxes directly on the business are almost 100% passed on to the consumer, or the offset comes from lay-offs, benefit reductions, etc. The savings from within a company are almost always born by the average worker and not the high rollers.

It is just a bit more difficult for them to say, "well, our executives and sales managers must make X dollars after taxes" than it is for the accounting department whose sole job at a business is to achieve certain profitability targets to pass costs on the customer.

Basically, increased taxes on a business almost always are automatically passed on to the consumer. Increased taxes on individuals are much less likely to be passed, in full, on to the consumer.

edited: spelling

[phleshdef]

35. How is it less likely to be passed?

Sorry but you are just pulling that out of your ass.

The people that run the bank are the ones that would be taxes and they are the ones that make the "well our executives make X dollars... yadda yadda". You think they aren't going to look for ways to give themselves more money??? Those are the same people that crafted the policies that created this whole mess to begin with.

I stand by my statement. ANY tax has the potential to be passed onto the consumer for one. And for two, you have no idea how this particular tax/levy the administration is talking about will be carried out or based on because no details have been released. Its just more knee-jerk criticism pretending to be constructive dissent.

[Vinnie From Indy]

26. Keep dreaming!

You post reminds me of a person that is supremely proud for offering that the Sun is hot or that water is wet. Of course banks will pass taxes on to their customers. One need not be Albert Einstein to figure that out. That being the case, this proposed tax by Obama is nothing more than a con job. It is a tax on the American public.

In addition, your silly offering that consumers can simply "move on" or go somewhere else is breathtakingly ignorant. The fact is that due to consolidation, many of these banks are the only game in town. Folks with 401ks, pension funds and the like do not have that many choices anymore. Sure, individuals can move their money around, but many institutional investment funds have nowhere else to turn.

Tax the executive's bonuses not the banks.

Also, you completely ignore in your reply the issues raised by other posters about how the Obama Admin. is NOT addressing the fundamental problems concerning Wall Street in regard to breaking up these "too big to fail" institutions and the re-introduction of regulation like Glass-Steagall. That would be true reform. This proposed tax is NOTHING but theater designed to distract Americans attention away from the estimated 82 billion dollars that will be doled out in the form of bonuses on Wall Street. Not only is it pure political theater, it was most likely planned as a response to the bonuses months ago. These folks are not stupid. They knew that the bonuses would cause an uproar and this proposed "tax" on banks was designed to be introduced at precisely the same time as the bonus giving takes place. Feel free to be a sucker if you want, but I am not playing.

[phleshdef]

28. Taxing bonuses is no different. Taxing the bank or the bankers will have the same end result.

The rest of what you said I am dismissing because its a bunch of pretentious douche baggery that isn't worth my time. For all your fancy points, you are totally missing out on common sense here.

[Vinnie From Indy]

29. The only thing more breathtaking than your ignorance

is your laughable style of debate. You remind me of a Woody Harrelson character in a movie where he offers, "I would have been Doctor except for having to learn all that science and stuff".

If it would help, I will restate my arguments and try to keep my points from being too "fancy". Would that help you? Maybe if I used a crayon font that might help you engage in debate by actually addressing points offered in rebuttal.

[phleshdef]

30. Don't mistake the fact that I dismiss you for an inability to debate you.

I simply don't give enough of a shit to bother writing a 5 paragraph diatribe to refute your nonsense. You are wrong from the get go anyway. A tax on a bank is a tax on a bank. Whether we tax the bankers or the bank itself has the potential to lead to those banks attempting to pass it onto the consumer. I am right on that and you are wrong. Its really that simple. A complex argument is not needed, thus I am not going to bother to create one.

It doesn't matter how the tax carried out. It can potentially be passed onto the consumer. That is irrefutable. You lack the ability to refute it. That very simple argument trumps every single thing you said. But don't worry, you will live.

That doesn't mean we shouldn't enact it. We should. We need to.

Furthermore, you (nor I) have any clue how this particular levy would be enacted to begin with. We have no details. You are just running your fucking mouth, assuming things that support your anti-Obama agenda and generally making an embarassment of yourself. Its the trademark, knee jerk reaction that is typical of the leftbagging agenda that you and certain others on this board display on a daily basis while hiding under the false premise of "dissenting".

The only thing laughable is that you actually expect me to take someone like you serious. Too bad for you. I don't take you serious. I see your agenda and its a joke to me.

[Vinnie From Indy]

36. You seem to be a bit confused

Firstly, you offer that you will not take five paragraphs to refute what you consider to be nonsense and then you offer exactly five paragraphs attempting to refute my post. Nice!

Also, you keep writing that there is a "potential" that taxes levied against these banks will be passed on to customers. I am offering that it is a certainty that the taxes will be passed on to the consumer.

I made the point that if the Obama Admin. were truly serious about addressing the outrage against bank bonuses, they would tax the executives receiving the bonuses rather than the institutions as is being done in Europe. You ignored this point.

I also offered that if Obama were serious about reforming Wall Street and protecting Americans from another financial meltdown in the future he would push for breaking up the "too big to fail" banks and bring back regulations that would make it much more difficult for these banks to engage in the practices that have brought us to this point. You ignored this point as well.

Lastly, you offer that a complex argument is not needed to refute my point of view. Of all that you have posted so far on this thread, we can both agree that you have achieved your goal of not offering a coherent, rational or substantive argument.

:)

Edit: spelling

[phleshdef]

39. You seem to be a bit butt hurt because someone on the internet isn't taking you serious.

Poor little you. Next time, I'll make sure not to put blank lines between my sentences so that you don't accuse me of writing substantial paragraphs. My argument was far from "complex" and if that is what you consider complex, it sais a lot more about you than it does about me and what it sais doesn't reflect well on you at all. If my points were incoherent or irrational, you wouldn't be able to spell out what points I made as you just did. You just defeated your own argument there, I need say no more about it. I use the word "potential" because I don't claim to predict the future and thus I use cautionary language when referring to possibilities. Its something adults typically do in conversations. Its an approach you should learn how to use. You would make less of an ass of yourself. Overhauling the entire financial sect is something that Congress has to pass, just like everything else. There are new regulatory bills in the works now. But like many knee jerk reacting, unrealistic, anti-Obama for the sake of being anti-Obama posters that frequent this site, you haven't bothered to consider how our system of government actually works and what other matters needed dealt with this past year before attempting to overhaul the financial system. This levy has nothing to do with that, it has to do with retrieving back TARP money and getting the deficit under control.

[Vinnie From Indy]

41. Thank you!

You have brought a little levity to my morning with your posts! Cheers!

One last thing and then I will let you go back to looking for your Prozac bottle.

You write,
"I use the word "potential" because I don't claim to predict the future and thus I use cautionary language when referring to possibilities. Its something adults typically do in conversations. Its an approach you should learn how to use. You would make less of an ass of yourself."

Is this your philosophy of life? Is it a rule that you always use cautionary language when referring to possibilities? Do you say things to yourself like, "I guess I will jump out of this plane without a parachute because there is a possibility that I will land on a giant marshmallow" or "sure, I will place my hand on this glowing, red-hot stove element because there is the potential that my flesh is fireproof"?

No need to respond! Thanks for the laughs and Godspeed in your search!

:)

[truedelphi]

49. Problem is that they have already rewarded Big Banks w/ such huge tax

Breaks and giveaways that I am not sure this new taxation will undo the taxbreaks from previous setups.

And then even if these taxation policies hurt the banks
1) either the consumers will have to pay for them
2) the taxation will cease and be undone a month or two down the road

[leftynyc]

31. You're quite the dick, aren't you? (n/t)

[Vinnie From Indy]

33. You don't know the half of it!

Cheers!

[rufus dog]

22. and every customer has the option

to pull every friggen dime out of the bank, eliminate credit debt with the banks.

[progressoid]

44. Uh, no. That's not always an option

First, my mortgage. I've tried to find another lender but no one other bank will take over my mortgage. And no, it's not upside down.

Secondly, my business occasionally needs credit to operate. Currently, my two options are a line of credit with my bank or credit cards. The bank LOC is a better deal.

[BeyondGeography]

37. My, what a fine University of Chicago, Milton Friedman talking point

:thumbsup:

[amborin]

34. way too little, way too late: "an empty populist gesture" perhaps:

"Seeing the problem merely as "the public is angry" implies that the collective reaction is simply emotional, and by implication, unjustified. That is 180 degrees wrong. To use an expression I heard in Venezuela, Team Obama may have changed its mind on where it stands relative to the banksters, but it has not changed its heart. And it hearts bankers, big time.

So what should these fees be about? They should, correctly, be depicted as windfall profits taxes. The US has implemented them from time to time, most notably in the 1970s oil crisis. The idea that the extraordinary profits the banks are enjoying are the result of their efforts needs to be assaulted, head on. They are almost entirely the result of continuing government intervention.

As the BBC's Robert Peston explains (hat tip reader Tim C)

First, what proportion of investment banking profits can be seen as an exceptional windfall, stemming from the unprecedented financial and economic support provided by governments and central banks to lessen a recession that was caused in large part by the recklessness of banks?

This question can be broken down into two parts.

(1) How much has been earned by what investment bankers style as a "carry trade" with central banks? This is the business of buying assets that yield 5, 6, 7 or 8 percentage points over the official lending rate, and then refinancing those assets with the central bank at that official lending rate. Borrowing at close to zero from the central bank and lending almost risk-free at 6 or 7% is not the most stressful or challenging way to generate bumper profits. Investment bankers tell me this carry trade has been happening on a system-wide scale, in spite of central banks' precautions to prevent it.

(2) How much of the investment banks' profits is the result of a generalised rise in asset prices, caused by the easiest monetary conditions for a century, which has led to a recovery in the price of securities that in the previous year generated spectacular losses for the banks? This gain from marking investments to the market price should not be seen to be the consequence of management genius, since the main reason the banks didn't sell the securities in the previous year is that they were unsellable...."

snip

http://www.commondreams.org/view/2010/01/12-8

[uponit7771]

43. Of course, nothing Obama does now is good... /sarcasm (yeap, cause it's needed on GD)

[nightrain]

48. good. Thanks for posting. A very high windfall profits tax on these greedy bankers

would be okay with me.

[shadesofgray]

42. Pocket change for them.

[progressoid]

45. He better tack on some regulations too.

[DisgustedInMN]

46. Yeah yeah...

...sure sure...

He's gonna show 'em this time around. :sarcasm:


Pardon me while I :puke:

[WI_DEM]

47. Obama is just like Bush!!!!!

[SpartanDem]

51. K&R

[OnionPatch]

53. I very much want to believe this is really going to happen.

And if it does, then kudos to our president. He will have earned back some of my respect. But since he talked about doing a lot of good things that he ended up backing off on, and I'm just a little hesitant to believe this will really happen. So, call me an Obama hater if you like, but I'll believe it when I see it.

[amborin]

54. distracts attention from the hearings:

"The Obama Administration is now caught in its own machinations and is having to backpedal fast and hard from its bankster friendly posture, or at least have the public believe it is executing that maneuver.

While I cannot fathom the logic, Team Obama clearly decided to throw in its hat with the industry from the beginning, supporting a whole raft of tricks to keep banks from recognizing losses (heavens, might expose that some were bankrupt and require that incumbents be given the heave ho!). It also assisted in the “talk up the bank stocks” effort, since goosing prices would allow some banks to sell shares and save the new Administration the unpleasant task of figuring out how to resolve and recapitalize the sickest bank. It never seemed to occur to them that the best time for a President to take unpopular but productive action is at the start of his tenure. Nor did they anticipate that the public was not as dumb and inattentive as they assumed, and has taken notice of how the Administration has hitched its wagon to that of the plutocrats.

Now some readers might argue that, gee, things look better than the did in March, surely this Team Obama program was not such a bad idea. Well, actually, it was and is. The record of serious financial crises shows that regulatory forbearance (which is letting banks soldier on with the hope they will earn their way out of their messes over time) is more costly than forcing them to recognize losses and recapitlize them. Not only are the ultimate bailout costs higher with the “let ‘em off easy” approach, but economic recovery is weaker too.

Team Obama is now having the contradictions in its stance exposed. If the banks were really healthier due to their own efforts, the salvos against them would be unwarranted. Here they had gone over the brink, pulled themselves up by their bootstraps. All these complaints about their earnings and bonuses are mere class jealousy. But no one save the banksters themselves believe that tripe. The banks got massive subsidies during and after the crisis; they continue now with the Fed’s super low rates and continued intervention in the mortgage markets (theoretically ending in March, but most informed observers expect the central bank to blink).

But Team Obama does not want to play up the extent to which the industry has benefitted from public munificence; that only stokes the deserved and correct public anger, which includes the Administration for cutting such a crappy deal with the industry. So it has the PR conundrum of having it be beneficial for political reasons for them to beat up on the financiers, but now being so deeply aligned with them as to make that impossible, save perhaps on a few narrow issues that it hopes will have sufficient peasant-appeasement value.

Any full-bore attack would represent an embarrassing change from the Administration’s past fawning posture, and would also require the sacrifice of a senior head or two, presumably starting with Timothy Geithner, to look credible. But Obama seems constitutionally incapable of firing anyone, no matter how much it would serve him to do so.

The sketchy announcement du jour, that Obama will announce a $120 billion TARP fee this week (hhm, conveniently timed to distract attention from the start of the hearings into the crisis and Wall Street bonus announcements) illustrates the bizarre position the Administration is in. Alert readers may recall that Obama was touting the performance of the TARP at his Lehman anniversary speech in September. It repeated that palaver in December. As we noted then:

Both Obama and the Treasury Department keep talking up the TARP as if it is a money maker for taxpayers, when nothing could be further from the truth. Obama tried this stunt in his anniversary of Lehman speech, and the Treasury continues with the theme, of implying that results for the firms that paid back are representative of what the final results would be.

If this logic were generally true, that would mean subprime bonds were a good investment too. After all, most borrowers did make good on their mortgages. A late September Moodys mortgage survey that a reader sent me estimated that total losses on subprime RMBS will be about 26%, which means that 74% were money good.

The problem with the Treasury/Obama three card monte is that the strongest TARP are the ones that paid off first. Things can only go downhill from here. Do you expect AIG to repay the TARP in full? Or the auto companies?

But you’d never guess that if you took the latest propaganda at face value. From MarketWatch:

The Troubled Asset Relief Program has generated at least $16 billion in profit so far, the Treasury Department said late Wednesday…

Total repayments by TARP banks should top $175 billion by the end of 2010, cutting taxpayer exposure to the sector by three-quarters, the Treasury estimated.

TARP programs aimed at stabilizing the banking system will ......"

snip

http://www.nakedcapitalism.com/2010/01/obama-to-announce-120-billion-tarp-fee.html

[bvar22]

55. I'll believe it....

...right after I get my Public Option insurance.

[saracat]

56. I think this is very good news but I hope the money is passed on to the consumer that the banks

have been screwing! And i hope this comes to pass. the last time I really cheered was when the president said he was promoting removing the anti trust exemption for the insurance comapnies and that came to naught! So whoopee, but cautiously.

[pleah]

57. K&R

[jgraz]

59. He should be putting this on bank *executives*, not the banks themselves.

The people who looted these institutions and stole our tax dollars are not the banks (e.g. shareholders), they are the criminal executives who filled their own pockets while the companies (and economies) they were entrusted to run went bankrupt. Obama needs to go after theses thieves, recover our money and throw them in prison.

[Amonester]

60. +1 trillion

Even if the Obama-needs-to-go-after-these-thieves,-recover-our-money-and-throw-them-in-prison will never happen.

Too bad it would send a clear message and set an example of what true justice must be at all times, and that's why nothing like that will ever happen.

Absent a nation-wide hunger strike... Why does it have to be that way?