Rep. Peter Welch Introduces Bill To Tax Overly Large Bankster Bonuses

Yesterday, Vermont progressive Peter Welch introduced legislation that would tax bonuses over $50,000 paid by the financial institutions that were bailed out with taxpayer funds. Under Welch's bill, the proceeds, expected to be "billions" will go exclusively to a small-business lending program.

"As most Americans struggle to endure a long and wrenching recession, the same Wall Street bankers who came to the American taxpayer with hat in hand are now preparing to pocket record-breaking bonuses," Welch said. "Financial firms that received taxpayer assistance must remember that they owe their return to profitability to hard-working Americans."

...Welch said the legislation, for which he is seeking co-sponsors, was prompted in part by widespread popular "outrage" that banks earning substantial profits after receiving taxpayer assistance expect to funnel money into their own huge compensation packages "instead of lending" to businesses, as Congress intended.

He said those banks scaled back small-business lending by $11 billion since April 2009. Revenue created by his bill would provide low-interest loans to otherwise healthy businesses that are having difficulty obtaining credit.

Welch's proposal is pretty moderate-- the rate is only 50%, where others are sticking to the tax on financial transactions or a 75% rate-- and would effect banksters working at Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley, which have put aside $90 billion for bonuses this year. Goldman Sachs' average bonus payout this year is slated at just under $600,000, although most of the money goes to a small handful of top-level crooks gobbling up millions each. Welch's first two co-sponsors are Jim McDermott (D-WA) and Lloyd Doggett (D-TX) all of whom agree that record bank profits didn't come from anything beyond record bank hand-outs from government and their ability to borrow at near zero percent interest while charging their customers sky high, unregulated interest rates (on credit cards, for example). “When people are robbing a bank, it’s time to stop them," said Welch.

Meanwhile, as expected, the Wall Street-friendly Obama Administration-- I mean how else can you describe an Administration with seedy characters like Wall Street crooks Rahm Emanuel, Lawrence Summers and Tim Geithner at the top of the heap?-- has their own, less ambitious, proposal going to Congress. Today Obama announced a proposed tax on large banks which is intended to restrain speculation (as opposed to investment) and restrain outrageous bonuses. Wall Street says they will fight him on it and since we all know who owns the Senate...

The administration wants to collect about $120 billion from banks over 10 years, taxing banks based on the amounts they have borrowed to finance lending and other activities, according to officials who agreed to speak before the president's announcement on the condition of anonymity.

Industry executives already warn that hitting banks will hurt the broader economy because banks would seek to impose the cost of any tax on customers. Officials said the tax was designed to encourage a different result: Raising prices to give a competitive advantage to smaller banks, which would not pay the tax, and giving larger banks incentives to borrow less money or pay smaller bonuses to employees.

The avaricious banksters, many of whom view themselves, predictably, not as people lucky enough or shrewd enough to wind up in good corporate managerial positions-- these people are decidedly not entrepreneurs or heroic risk takers (other than with other people's money) or even especially innovative or brilliant-- claim that what they term "talent" will flee the industry. Does that mean we won't have another series of multi-billion dollar bank failures? Barney Frank, Chairman of the House Financial Services Committee, laughed in their faces: "I don't know where people would go for comparable salaries. I guess perhaps they could star in major motion pictures."

Well they could get jobs on K Street or run for the Senate or start a reality show or take up NFL quarterbacking. Or maybe one will invent a cure for cancer. Oh scratch that last one; inventors don't make nearly enough as banksters.

The proposal is modeled on the fee that the Federal Deposit Insurance Corp. collects from all banks to repay depositors in failed banks. The FDIC fee is based on insured deposits-- the largest funding source for bank activities-- but the new fee would be based on money raised from other sources.

The financial industry already is marshalling a case against the proposal. The American Bankers Association noted that the Treasury Department projected in December that every government program aimed specifically at stabilizing the banking industry would turn a profit. Industry executives said the tax likely would not achieve its stated purpose of placing large banks at a competitive disadvantage.

"Using tax policy to punish people is a bad idea," Jamie Dimon, chief executive of J.P. Morgan Chase, told reporters following his testimony before the Financial Crisis Inquiry Commission. "All businesses tend to pass their costs on to customers."

No one is talking about prison terms or even criminal investigations to get to the bottom of the greatest transference of wealth from ordinary working families to a handful of rich parasites.




UPDATE: As Expected...

Republicans immediately came down firmly on the side of the banksters and against consumers. Here are some of the reactions from a trio of Republican clowns on the House Financial Services Committee who have taken some of the biggest bribes from Wall Street and Wall Street lobbyists-- along with how President Obama had already addressed their specific "concerns."

Spencer Bachus (R-AL- $4,077,924) was all worked up: "There is no way the Administration can design a tax on financial firms that will not be passed on to consumers and investors in the form of higher interest rates and increased fees. The tax will only drain capital from the financial system at a time when it’s needed to create jobs and fuel economic growth."

The President addressed that: “What I’d say to these executives is this: Instead of sending a phalanx of lobbyists to fight this proposal, or employing an army of lawyers and accountants to help evade the fee, I 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.”

Scott Garrett (R-NJ- $1,325,659) was screaming all over Capitol Hill that "any tax or fee could hinder the economic recovery and further limit the industry’s ability to extend more loans." President Obama had already discussed that, although Garrett probably wasn't listening to anything by the crazy voices in his head. Obama: “Ultimately, it is by taking responsibility-- on Wall Street, here in Washington, all the way to Main Street-- that we’re going to move past this period of turmoil. That’s how we’re going to avoid the cycles of boom and bust that have caused so much havoc. That’s how we’re going to promote vibrant markets that reward innovation and entrepreneurship and hard work. That’s how we’re going to create sustained growth without the looming threat of another costly crisis. That’s not only in the best interests of the economy as a whole; it’s actually in the interest of these large banks.”

Jeb Hensarling (R-TX- $2,429,700), not exactly a professorial type, snarled that "to think that banks will loan more money if you tax them is beyond economic ignorance." He's just another congressmember so in love with his own bloviating that he ignored the president: "The financial industry has even launched a massive lobbying campaign, locking arms with the opposition party, to stand in the way of reforms to prevent another crisis. That, too, unfortunately, is business as usual. And we’re already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair-- that by some twisted logic it is more appropriate for the American people to bear the costs of the bailout, rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.”

And, of course, the shill the GOP is running for Ted Kennedy's old Massachusetts Senate seat joined his Republican colleagues in backing the banksters over their hard-pressed customers. Big surprise (not)!