Paying the Piper, and changing the tunes: not an idea whose time has come to Wall Street

Obama Promises All-Out Battle to Impose New Tax on Major Banks

President Barack Obama defended his plan to “collect every dime” of taxpayer bailout money from as many as 50 major financial institutions and promised enactment of legislation to crack down on practices that led to the financial crisis.

“We’re not going to let Wall Street take the money and run,” the president said in his weekly radio and Internet address. “We’re going to pass this fee into law.”

“These financial firms took huge, reckless risks in pursuit of short-term profits and soaring bonuses,” Obama said. “They gambled with borrowed money, without enough oversight or regard for the consequences. And when they lost, they lost big.”

The goal “is to promote fair dealings while punishing those who game the system; to encourage sustained growth while discouraging the speculative bubbles that inevitably burst,” Obama said.

Obama said the financial industry is fighting “against common-sense rules to protect consumers and prevent another crisis.” Those same firms, he said, are “now handing out more money in bonuses and compensation than ever before in history, are now pleading poverty. It’s a sight to see.”

"If the big financial firms can afford massive bonuses, they can afford to pay back the American people," he said. "After a very tough two years, after a crisis that has caused so much havoc, if there is one lesson that we can learn, it's this: we cannot return to business as usual."

One analyst called the fees "onerous," especially for firms focused on capital markets like Goldman Sachs Group Inc. and Morgan Stanley. Another compared the plan to the policies of Venezuelan President Hugo Chavez.

JP Morgan just reported, according to Reuters,

Strong investment banking results helped quarterly profit soar to $3.3 billion, topping Wall Street expectations.

And, JPMorgan is set to pay its banking staff handsomely. It set aside a record $9.3 billion to pay investment banking employees.

Meanwhile, the Goldie boys and girls are seen to be having their own great expectations.

Goldman Sachs bankers 'set for 81% rise in bonuses'

JMP Securities analysts concluded that even though the proportion of pay and bonuses to revenues will fall at Goldman, "we still expect an 81% rise in compensation per employee in 2009 to $599,000 per head … although this remains 14% below peak 2007 compensation levels".

The Big Banks, of course, will not take this, or anything else that tries to put rails on their sand box, lying down.

Volcker Calls for Support in Fighting Bank Lobby on Reforms

“Some market participants, possibly some in this room, seem to be suggesting that the events of the past couple of years were like a bad dream -- a truly unsettling bad dream, but nonetheless something that in the cold light of day need not require a really substantive change in the structure of markets or corporate lifestyle,” Paul Volker, the former Federal Reserve chairman advising the Obama administration, said.

Volcker said bank lobbyists are promoting “reform light” and blocking regulatory changes that would stave off future crises. “There is heavy lobbying on the other side, and that has to be overcome.”

“It’s nothing more than another tax on the American public,” Michael Steele, chairman of the Republican National Committee, said.

Obama’s Tax Faces ‘Fierce’ Congress Opposition, Martinez Says

President Barack Obama’s proposal to tax the biggest financial firms will face “fierce” opposition in Congress, former Florida senator and Republican National Committee Chairman Mel Martinez said.

“This is a significant 10-year tax which may put U.S. banks at a very disadvantageous position in terms of world competition,” Martinez said. “This is not just for the bonuses this year.”

“It’s particularly bad that he’s not asking General Motors to pay back,” Martinez said. “In fact that money was designed for financial institutions. It was never supposed to be a bail- out for General Motors.”

Obama Bank-Tax Proposal Has Populist Appeal, Political Critics

Republicans labeled Obama’s “Financial Crisis Responsibility Fee” a politically motivated proposal that, while aimed at an unpopular industry, would end up hurting most citizens.

“The public is incredibly angry at the banks and feels that the banks have made a huge amount of profits off the taxpayer rescue,” said Doug Elliott, a fellow at the Brookings Institution in Washington and a former managing director at JPMorgan Chase & Co. “Virtually every figure in Washington right now is trying to step forward and make clear they’re with the people and not the bankers.”

Wall Street May Reduce Compensation to Avoid Outcry (Update1)

Guambat reckons that there has not been one scratch made in the highly polished walls of Wall Street, and it will bring us more misery of the kind seen this decade until the excessive laissez-faire mindset is rolled back.

Indeed, Guambat half expects to see weakness in the Wall Street stocks as the machine cynically winds down a bit to put the hurt, and the appearance of hurt, on stockholders until Obama's plans to rail in the bully boys are squashed.

Guambat reckons Goldie and the others have already put on the derivatives to profit from that, too, just as they did with the subprime derivatives.

While Wall Street likes things laissez-faire in Washington, in their Hood, there's nothing fair.