Looks like the banksters are fighting back against the proposed tax:
Banks are considering an aggressive lobbying campaign to try to defeat President Barack Obama’s new bank fee, arguing that it could cost the economy as much as $1 trillion in lost lending.
“The money to be collected is capital being pulled out of the banking system that could support ten times the amount in new lending,” a senior industry leader told POLITICO. “That’s because $1 in capital supports $10 or more in lending. So the tax will pull not $90 billion in lending capacity out of the banking system, but $1 trillion in potential lending.”
The industry official continued: “The Administration is choosing, it seems, to score political points at a time when millions of American businesses, families, and unemployed workers continue to struggle. Shutting off a trillion dollars in private lending capacity isn’t, in our view, the way to stimulate the economy.”
It doesn’t even occur to them that A.) the tax is a reaction to the fact that they are rewarding themselves record bonuses, that B.) instead of screwing the public by contracting lending, they could not reward themselves for greedy failures, and C.) that all the money they made this year was because of the government (translation- you and me) giving them free money to lend back to people for interest.
It is seriously time to start shooting these assholes in the public square one at a time until they get the message.
Stroszek
Is it just me, or has the media completely buried this story?
bago
We are talking about people who think that re-defining contracts without consent is ok
Steve J.
It is seriously time to start shooting these assholes in the public square one at a time until they get the message.
I was thinking maybe we could clone Stalin and let him run the SEC for a couple of days…
Ivan Ivanovich Renko
@Steve J.: Death solves all problems. No bankster– no problem.
frogspawn
I was thinking maybe we could clone Stalin and let him run the SEC for a couple of days…
Or Beria.
kay
It only applies to the fifty biggest banks.
If they raise fees or cut lending we could just go to those banks that are not the fifty biggest, right?
It’s the too big to fail tax, really.
valdivia
what is interesting and very good politics is that now the republicans have to come out * against* this tax in the light of day and look like the assholes that they are. the media of course is going to do its utmost to make them into heroes though for defending the poor banksters….
robertdsc
I think this is a big part of the baseline problem. Do these numbers have any basis in reality? None of the others that led to the crashes did. Why do these losers continue to make statements based on nothing but hot air?
valdivia
@robertdsc:
because ‘journalists’ like those at Politico let them? and numbers are the difficult?
jeffreyw
Obama just needs to come out and explain, by using the bankster’s own metric, the bonuses are removing capital from the lending pool: “The corrupt bastards are giving themselves fat bonuses of (X) which means they are taking 10 times (X) out of the lending pool.”
dsc
Let’s name the tax–like the popular meme “the death tax”–I propose this one be called “the Banker’s Bonus tax”–no one on the mythical “Main Street” would have a problem supporting THAT tax.
And didn’t we taxpayers give them billions to keep them “lending”– which they did not do?
I like Phil Angelides’ metaphor– they sell us cars with bad brakes, then buy insurance on the drivers–making money the old fashioned way! Stacking the deck, taking the house cut, and taking only the risk that guarantees they will win!
El Cid
‘If we were to suggest that each $1 of these proposed taxes represents 11,000 children who would otherwise immediately die of dysentary, alone, in a cold cellar, with no one to watch them, would it work enough to get you to stop?’
kay
Or. They could avoid the tax by breaking into smaller banks with less than 50 billion in assets in each entity, which would solve the taxpayer’s too big to fail problem, going forward.
I don’t have any problem with that. Using the tax code to encourage breaking them up seems reasonable.
I know they aren’t going to pay the tax, they’ll weasel out of it, so they may as well weasel out in a productive way.
Morgan
@jeffreyw: Exactly what I was thinking. Didn’t they just give themselves something like $450 billion in bonuses? Isn’t that $4.5 trillion in lost lending?
PeakVT
Do these numbers have any basis in reality?
Probably not, but they are Big Round Numbers™, which tend to impress the general public.
bcinaz
It’s an absolute mystery to me why Too Big To Fail banks have any customers left at all.
If you are still banking with Chase, BofA, Citi, or any other multi-billion dollar bonus bank – get your money out of there! Get other credit cards, join a credit union, put your dough into a bank thats business is actually banking.
Kirk Spencer
@robertdsc: Yes, they have a basis in reality. But only a basis, and it’s being used as the shiny object.
The basis is that the Fed requires a 10% reserve on net transaction accounts in excess of the low-reserve tranche (see here).
Of course, the low-reserve tranches only require 3% reserve. Oh, and then there are the various instruments which are valued to model which count as part of reserve. (That is, “Using the garbage we put into models built on how we think things behave we get garbage out that says these are worth $$$$.” Yes, that’s unfair. So is what the banks did and are doing.)
Bottom line – there’s a basis for the 10%, but they’re trying to get you to focus on that shiny object and ignore the man behind the curtain.
geg6
@bcinaz:
This. A thousand times, this.
r€nato
@bcinaz:
no. shit.
Let’s get this party started, then. If you’re on Facebook, start spreading the word.
Comrade javafascist
While people with minimum wage jobs with no health care benefits are donating $10 on their cell phone bill to help people even poorer than them in Haiti, the banksters are fighting to award themselves massive paydays so they can vacation in the islands that haven’t been torn apart by natural disasters. One does have to admire their chutzpah. And I, for one, would happily tell them that repeatedly whilst kicking them in the nuts.
kommrade reproductive vigor
Fxd.
Maybe they can get the NYT will run a few more Poor Little Rich CEO articles.
@geg6: Squared. My bank is one of the few locally-owned ones in the area. They don’t have ubiquitous branches like Citi, but that’s what ATMs are for and I know the bank president’s home address.
Jasper
@bcinaz:
Find a local bank near you here: http://moveyourmoney.info/
@jeffreyw:
It is helpful the crooks are highlighting that every dollar paid to one of those assholes, or for a new corporate jet, or $75,000 rug, etc. removes $10 in lending! John Thain’s $1.2 million office redecoration meant $12 million wasn’t available to lend to a growing small business!!
If that message really sinks in with the public we might be able to get somewhere reigning in the industry.
r€nato
Let’s get this party started:
Move Your Money
chrome agnomen
john needs to start the Bank of BJ.
Sly
Either that industry leader doesn’t know the difference between free reserves and total reserves, or that industry leader just issued a huge fucking bluff.
Wilson Heath
Basic tax theory on a consumption side: a consumer has the choice of consuming two similar but distinct commodity products, and price and preference will come to an equilibrium. Impose a tax particularly on one and the end price changes and the preferences change. People respond to the shifted incentive.
If the tax in discussion is a trading transaction tax and not a lending transaction tax, the banks end up doing what they were given money to do because they get an incentive to shift some of their activities to lower taxed activities. Yes, the tax system alters the economics, but so did the regulatory system when it handed these monkeys lit sticks of dynamite. Sometimes the economics in place are not good for people, and who gives a rat’s ass about efficiency if it doesn’t make people on the whole better off?
rickstersherpa
They just want it all.
One point they are remarkably quiet on is the huge subsidy and competitive advantage they are now receiving on their ability to borrow capital based on the rather explicit Government guarantee they all have as To Big to Fail.
And of course, the explicit subsidy that that the Fed is giving them with a steep yield curve as they can borrow short from the Fed at near zero interest rates and then trade securities such as Treasuries that pay 3% to 5%y based on their longevity or engage in a dollar carry trade with foreign currencies.
Finally, the tax, about 10 billion a year for ten years, pales in the looting these dudes with their bonues of both their banks capital base and the shareholders (who of course bear the risk if their trading bets go bad). J.P. Morgan Chase alone has announced bonuses of near 30 billion dollars for its employees (almost all of it going to a few hunrded senior executives and traders) according to today’s N.Y. Times.
These are also the same guys ranting about the budget deficit and the need “for a strong dollar.” But apparently it is up to the little people to make the sacrifices to bite that bullet.
But they can count on Congresswoman Bean and Senator McConnell to carry this BS for them.
trnc
Actually, I’m sure it did occur to them. They just don’t care, and they’re betting on plenty of backing from senate buddies.
Time to change the filibuster rules.
Sly
@robertdsc:
Basic banking lesson GO:
The Fed requires all commercial banks to keep a certain percentage of loanable cash on hand. This is called the reserve requirement. So if a bank wants to loan someone $100,000, they need to have $10,000 dollars in reserve.
The reciprocal of this required percentage serves as a money multiplier for the amount of loanable funds a bank has at its disposal. If the reserve requirement is %10, the multiplier is 10X. So if a bank has $100,000 cash on hand and a reserve requirement of 10%, they basically have a million dollars in loanable funds. Yeah, it sounds like manufacturing money out of nothing. But its been the norm in banking for 200 years.
What “Senior Industry Leader” isn’t telling Mike Allen is that banks never lend this total amount. They calculate expected borrowings, subtract that from total reserves, and keep the remainder (free reserves) off the table. And if a bank manager cut into expected borrowings, which is how a bank makes its money, instead of free reserves, which it holds for emergencies, than the board of directors or shareholders of said bank would be fully justified in firing their ass.
The Grand Panjandrum
Hanging is more sustainable and has a smaller carbon footprint. You have to reload a spent cartridge. A rope can be used over and over. Re-use is always preferable to recycling when the option is available.
The banksters will lose this one. They are tone deaf and either so catastrophically inept to know what happened or they know what happened and aren’t saying. Either way, the current populist dissatisfaction with the banksters, by both left and right make this kind of tax a no brainer.
If you want to better understand how all of this deregulation came about the “too big to fail” banking model was born I recommend this piece at The Nation.
Wilson Heath
44% of Congress are millionaires. Compare to about 1% of the U.S. population. Lots of capital income is usually necessary to sustain that sort of income level, especially when there are limits to even a generous Congressional salary. Don’t rely on these folks to get it, or if they get it to act against their self interest.
LGRooney
@bcinaz, #16,
Amen. Go to your local credit union, open the account and get started. Or, if a local one is not available, there are larger ones associated with a variety of interests, backgrounds, professions, etc., that are more reliable, more conservative, and have a desire to develop relationships with their clients.
As for the big banks, isn’t one of the problems with this recovery that they haven’t been doing the lending that they said they would, i.e., aren’t they already holding out on lending? In reality, they have so tightly restricted lending, the pendulum has swung so far in the other direction from the abusive days of the early naughties, that they’re only lending to their 7+-figure-income buddies.
aez
It would also be a great idea if the government would not require banks to make loans which the banks (and, frankly, the gov’t too) know will likely default. This signals a relationship that is begging for dysfunction.
mark
A-F*cking-men
Pococurante
Tone deaf has never bit them before. Why think it would start now…
And what are the odds this will pass Congress in any form with any meaning?
“Hey Rocky! Watch me pull a rabbit out of my hat!”
cleek
every time a business is faced with action from the government, the reply is “It will hurt consumers!”
every. single. time.
people in PR firms must have a funny little shorthand for this, when they talk amongst themselves.
“Hey Jim, the FDA is planning to limit the amount of mercury we can put in our pudding! How do we fight this?”
“Well, we’ll start with a bit of the old ‘Sad Consumer’ act. Then we’ll throw in a bit of Commie-Panikk – but only on the downlow, through our intermediaries. After that, we can start the ‘Death Of The Industry’ chant.”
New Yorker
Since when are they actually lending any money? Isn’t one of the big problems with the recovery the fact that credit is still scarce?
Let’s call this the “no lynch mob at 85 Broad St.” tax so these idiots get the message.
Otis Criblecoblis
Every normal man must be tempted at times to spit on his hands, hoist the black flag, and begin to slit throats.
H. L. Mencken
bob h
Given that the proposed tax ($100 billion) is a small fraction of the bonuses that the banks will award (perhaps $500 billion), isn’t the sensible thing politically for the banks just to accept it with some quiet grumbling? Not to go whole hog with the lobbyists and hyperbolic bullshit about the dire consequences?
Yes, the bank profits are mostly coming from trading, with lending weak.
Sly
Keep in mind that, if the banks in question could actually pass this liability on to another party, there would be no need to spend the money to lobby against it.
It’s because they can’t. And they know it. And the people putting forth this tax know it. But the public, by and large, does not because it sounds oh-so-intuitive.
Putting it another way, taking this liability out of expected borrowing would be like a company that makes dining room chairs take a slightly increased tax liability out of wood purchases. When demand for chairs is above production and the company’s managers have million-dollar expense accounts.
Putting it another way, you don’t shit where you eat.
JWeidner
This.
Thank you New Yorker – exactly my thoughts as well.
b-psycho
@Sly:
In practice, it’s even worse than manufacturing money out of nothing. They gamble money they don’t have, & then when anybody tries to prevent that they scream “but you’re taking reserves that could go to productive purposes!! Waaaaah!!” At least counterfeiting is straightforward.
The current system can never be truly salvaged, that much is obvious. We need to figure out alternate institutions for this before its inevitable full implosion.
New Yorker
http://www.nytimes.com/2010/01/15/opinion/15krugman.html?ref=opinion
You know, sometimes I wish the President would act more the part of a mafia don. Maybe if Lloyd Blankfein ended up with a horse’s head in his bed, or if Jamie Dimon had his Aspen ski condo mysteriously burn down, they’d get the fucking message.
scarshapedstar
I didn’t realize that these pricks were going to loan us their bonuses.
Steeplejack
@aez:
Details or link, please. Trollometer is vibrating.
scarshapedstar
@Steeplejack:
Aez is under the impression that:
A) Fannie Mae and Freddie Mac held the majority of subprime loans at the time of the collapse (false)
and
B) Most of the money lost in the collapse was tied up in subprime loans (false)
and
C) Most subprime borrowers were black (false)
Please don’t throw a hissy fit over the last one. My crazy grandpa forwards me all the big chain letters from the Wingnet. “Fannie and Freddie held hostage by shiftless n****rs taking out loans to buy Cadillacs and watermelons” is a popular theme.
ThatLeftTurnInABQ
@New Yorker:
I was thinking along the lines of calling it the Surrender the Loot or We Will Shoot You in the Face Investment Banking Taxation Act of 2010.
debbie
The other day on Lehrer, I heard a representative for the banking industry say that imposing any kind of fee or tax would really only punish the American people because banks would just pass the cost on to them. How is that any different than someone pointing a gun at you?
These bankers are truly soulless. How can they sit there with straight faces and expect to be rescued from the brink of disaster without paying some kind of cost? They certainly aren’t willing to do this for any of their loanees.
The ethical — the Christian — thing to do would have been to express sincere gratitude for the financing that rescued them, and then offer to do the same for those victims of the banks’ bad behavior. The taxpayer rescued them; it’s time for a little reciprocal action.
Sly
The only dangers found on fractional reserve banking have been mitigated by central banks, which can raise or lower reserve requirements to produce the desired effect within the money supply (raise = contract, lower = expand). Aside from that, the system allows for well developed system of financial intermediaries so long as said intermediaries are properly regulated in order to promote robust risk analysis.
That was the problem with the housing bubble and resultant explosion. Lenders had no incentive to do that kind of analysis because no one else was really doing it and they could just pass on that risk to someone further along the chain. The sky’s the limit when you’re gambling with someone else’s money.
Full reserve banking hasn’t been the norm for two centuries, and for good reason. I don’t care how utterly charming Ron Paul is (/snark), switching to full reserve banking would be a complete disaster.
ET
They would be better service PR-wise if they accepted this lump and then started figuring out how to mitigate it or flat out how to get around it.
These guys are poster children for the political definition of tone-deaf.
WaterGirl
@bcinaz: I am sitting here patting myself on the back because I don’t bank with any of the big banks and I paid off all my credit cards so these guys aren’t getting any money from me. Hah! Then a lightbulb goes off and I realize that when I re-invested my 125k in retirement money in July, I moved it to a fund that had some banks in it, like BoA. What an idiot.
So it’s not just about where you bank, it’s also where your investments are. (For those of us who are lucky to still have any!) I was having a hard time finding funds that didn’t include anything like that, which is why I ended up in the accounts I did in July. Does anyone know of some good alternative choices for those of us who care about that? I am limited to TIAA-CREF and Fidelity.
WaterGirl
@bob h: This tax is the total for a 10-year period. Is your $500 billion statistic based on one year or 10 years?
jenniebee
@trnc: changing the filibuster rules doesn’t go far enough, imo. Did you see Gail Collins’ op ed yesterday? She did the numbers: the 20 least populous states contain 10.2 percent of the national population. So in order to get a filibuster-proof majority, you have to gain representation of as much as 90% of the US population. It’s ridiculous. But before you get too excited about dropping the filibuster, consider that the next 5 states still only bring you up to 17.6% of the US population.
That 17.6% of the population controls half of the Senate and about 25% of the electoral votes. We live as an urban nation, but we’ve ceded control of our government to a rural minority which repays the favor by announcing triumphantly that one of their biggest political motivations is to stick it to urbanites any way they can. This is an unworkable situation, and it’s going to get more and more unworkable as the country continues on the trend toward a larger urban majority.
Svensker
@chrome agnomen:
I think Bill Clinton already got that one going.
Svensker
@LGRooney:
Yes. They are basically not lending.
Mike G
Do these numbers have any basis in reality?
Let’s see, it’s an anonymously-sourced quote (“A senior industry leader” brought up the $1 trillion number) from right-wing puke funnel Politico. Sounds trustworthy to me, and the Nigerian banker who’s going to send me a million bucks as soon as I wire him the ‘processing fee’!
Bruce (formerly Steve S.)
Glad to see someone is pushing the Overton Window on this issue. I wonder if anyone at FDL has advocated public executions yet.
dadanarchist
Last year, before Bush & Co. rammed the bailout through, a protester was seen holding a sign on Wall Street that said, “Bring Back the Guillotine.”
Maybe we could start with a stockade (you could set it up right in front of the bull). It would even stimulate New York’s economy. The fruit and vegetable sellers wouldn’t have to take a loss on their stale and rotten produce.
If that doesn’t work, then the guillotine.
Kyle
I suggest stocks.
Not equity securities, but actual wooden stocks. In Times Square. Accessorized by an ample pile of rotten vegetables.
cokane
this post made me laugh out loud. thank you
b-psycho
@Sly: I’m not advocating for full-reserve. Full-reserve isn’t “banking” at all, you can do that by just buying a safe and sticking your money in that, what would be the point?
Mister Colorful Analogy
@aez:
Ah, the bullshit CRA evul gubmit forced poor innocent banks to make loans to brown people argument, rephrased into a vague statement that sounds reasonable.
Another zombie lie, people. Nothing to see here, just stab the wanker failtroll with a rusty pitchfork and move on.
Mister Colorful Analogy
@ThatLeftTurnInABQ:
__
This.
As an environmentalist, I’m on board with the rope and hanging alternative, if that helps bring anyone else on board.
Mister Colorful Analogy
@Mister Colorful Analogy:
WTF? FYWP for not liking any of the FIVE attempts I made to format the previous comment properly.
Ruckus
It is seriously time to start shooting these assholes in the public square one at a time until they get the message.
Why only one at a time? I imagine that 5 or 10 at a time would
eliminatefix the problem faster.ThatLeftTurnInABQ
@Ruckus:
Grab them in batches of 10 and then shoot them 1 tranche (i.e. person) at a time, starting with the guy who was rated AAA and working down the list from there (in reverse of the usual order, I know. It’s called poetic justice). If anybody complains, line them all up in a row and shoot one bullet through the whole lot of them at once so it passes from one end of the line to the other, and call it a synthetic bond.
Seanly
Right on! And welcome, comrade!
Was it here or somewhere else that I read a comment about “For how great everyone says capitalism is, it sure needs a lot of people to defend it.” I’m all for people enjoying the fruits of their labor, etc. etc. but truthfully, capitalism doesn’t work.
flyerhawk
I work at one of the big banks. I work in IT and have no involvement with investment banking.
The bank I work for was forced to take TARP money in order to prevent people from getting spooked and doing a run on the troubled banks.
It paid back all the TARP the moment they were allowed to.
I also get a bonus, as does every full time salaried employee. In the case of my bank that is tens of thousands of employees. In the case of the larger banks, hundreds of thousands of employees.
Banks don’t give raises to their employees, at least nothing beyond standard of living increases which they may or may not provide in any given year.
My bonus is part of my salary and when I took the job it was understood that any merit pay would be reflected in the bonus.
I realize it’s enjoyable to use “banksters” as a boogeyman but all this fire and pitchfork stuff affects a lot more people than just the senior managers.
The people that will be most directly impacted by this stuff will be the rank and file employees. The guys making the huge bonuses will still get huge bonuses.
b-psycho
@flyerhawk: So…how do we make it so that instead of the guys in charge getting huge bonuses regardless of how badly they do, the arrangement is switched to “company does great & produces actual value = bonus; company does typical but doesn’t collapse = no bonus; company destroys long term worth in favor of gambling = firing & blackballing from any other financial jobs”?
flyerhawk
It’s tough to do for sure. But spiteful policy isn’t going to do it.
Finance isn’t the only place with inefficient compensation models.
Flugelhorn
Obama sure is making many powerful enemies in a very short period of time. If he isn’t careful, he and his party might find themselves on the wrong end of an election or two or three fairly soon.