ANALYSIS-Financial reform to give Obama limited lift at G20
By Caren Bohan
WASHINGTON, June 25 (Reuters) – The win President Barack Obama racked up on U.S. financial regulation reform on Friday will give him a boost at this weekend’s Group of 20 summit in Toronto but probably only a limited one.
In the shadow of the 2007-2009 financial crisis, the United States has often found its regulatory structure the target of fingerpointing by other G20 countries at recent summits.
The package agreed to by a joint House of Representatives and Senate negotiating panel would put new curbs on trading by banks, tighten bank capital rules and toughen regulation of derivatives.
When leaders of the world’s biggest economies get together on Saturday and Sunday, U.S. officials hope to show they are leading by example when it comes to cracking down on the risk-taking that helped set the stage for the crisis.
But Obama’s effort to showcase U.S. progress on the issue may get overshadowed to some degree by a debate over economic stimulus and deficit reduction that is set to take center stage at the summit.
Analysts say that while the U.S. financial reform bill’s passage is a clear step forward, it is another example of how individual countries are going their own way on financial reform. Without greater coordination, there remains the risk of a “race to the bottom” in which financial players seek out the countries with the most lax regulations.
Top Republican senator, White House clash on financial reform
By Kevin Drawbaugh WASHINGTON, April 13 (Reuters) – The White House said “yes we can” on financial regulatory reform on Tuesday, while the top Republican in the U.S. Senate said “no we won’t.” (more…)
ANALYSIS – Obama tackles Wall Street reform in next big push
By Caren Bohan
WASHINGTON, March 25 (Reuters) – Fresh from his victory on landmark healthcare legislation, U.S. President Barack Obama is ready to take on Wall Street.
In the same week Obama signed into law his sweeping healthcare plan, his administration began a publicity blitz to sell his proposal to reshape the financial regulatory system.
Obama held a strategy session on Wednesday with two Democrats, Senate Banking Committee Chairman Christopher Dodd and House of Representatives Financial Services Committee Chairman Barney Frank, who are leading the effort to pass the plan in Congress.
Democrats hope the healthcare win will lend momentum to the push on financial reform, an issue the White House hopes will be a political winner as the party seeks to stave off potential losses in the November congressional elections.
“The good news is that, whereas the Republican message machine managed to convince a lot of Americans that the healthcare bill was bad for them, I think they will have a harder time with the financial reform,” said Princeton University professor Alan Blinder. “Rightly or wrongly everybody hates Wall Street and the banks right now.”
The White House has sought to tap into public fury over Wall Street’s excesses to push its case for financial reform.
BREAKINGVIEWS – UK bank tax could raise up to 3.6 billion sterling a year
– The authors are Reuters Breakingviews columnists. The opinions expressed are their own –
By George Hay and Hugo Dixon
LONDON, March 24 (Reuters Breakingviews) – A UK bank tax of the sort being advocated by both main political parties could raise up to 3.6 billion pounds a year. The exact sum would depend on which parts of the balance sheet are taxed. But one thing is clear: as a proportion of earnings, RBS and Lloyds would be harder hit than Barclays, HSBC and Standard Chartered.
The most basic way of levying the tax would be to follow what President Barack Obama has proposed for the United States. He wants to levy a 0.15 percent annual charge on a bank’s total assets — minus its deposits and Tier 1 capital. Applying that to the five big UK banks would raise 3.6 billion pounds annually, according to Reuters Breakingviews analysis.
But the tax, likely to be formally endorsed in today’s Budget by Alistair Darling, the chancellor, could be modified. The opposition Conservative party says it would move ahead with a levy, even if other countries didn’t follow suit — but, in such an event, the tax wouldn’t be especially high through fear of driving Britain’s banks offshore. The Conservatives haven’t spelt out exactly what they’d do but they have spoken warmly of the “Swedish model”. Applying a levy at the same rate as the Swedes — 0.036 percent of total assets — would raise 2.1 billion pounds from the UK’s big five.
On the other hand, if a global approach can be agreed, some policymakers like the idea of concentrating the tax on short-term wholesale liabilities. The thinking is that it’s only such “hot money” that makes banks vulnerable — so long-term liabilities, say those over one year, should be excluded from the levy. Applying Obama’s 0.15 percent levy to a shrunken balance sheet, excluding long-term funding, would cut the UK’s tax take to around 2.7 billion pounds.
Whichever version of the tax is ultimately chosen, there will be relative winners and losers. Under the straightforward unmodified Obama tax, Lloyds would suffer a 21 percent decline in its forecast profit before tax for 2011, RBS a 20 percent drop, Barclays 11 percent drop and HSBC only 6 percent. The reason is simple: the earnings power of these bailed out banks is much lower than their healthier rivals.
Obama reasserts Volcker rule, U.S. Senate bill seen
WASHINGTON, March 3 (Reuters) – The Obama administration reasserted its commitment to banning proprietary trading by banks with draft legislative language on Wednesday, despite signs that the U.S. Congress is unlikely to adopt such a rule.
In a scant five pages from the Treasury Department, the administration put a two-year phase-in on its “Volcker rule” to curb “prop trading” — or buying and selling of investments on financiers’ own books unrelated to customer needs.
The rule would apply to banks, with limits slapped on large, non-bank financial firms, as well. In addition, banks would be barred from sponsoring or investing in hedge funds and private equity funds, under the administration’s language.
While key details were left up to regulators, the language showed the White House is determined to push ahead with a rule it first proposed in January, as the U.S. Senate inched its way toward acting on new financial reform legislation.
Authored chiefly by White House economic adviser Paul Volcker, the rule arrived late in a reform debate that has raged for months since the severe 2008-2009 financial crisis tipped the U.S. economy into a deep recession.
President Barack Obama in mid-2009 proposed a comprehensive package of reforms aimed at preventing another crisis. Most of them were embraced in a bill approved in December by the House of Representatives, but the Volcker rule was not in the mix.
By the time Obama and Volcker unveiled it almost six weeks ago, the Senate was well along in its debate about reforms. The Volcker rule complicated Senate Banking Committee Chairman Christopher Dodd’s task of moving a reform bill to the Senate floor, and he has still not managed to do that.
Obama lays out “Volcker rule” specifics for Congress
By Karey Wutkowski and Rachelle Younglai
WASHINGTON, March 3 (Reuters) – U.S. banks would be banned from proprietary trading and other large financial firms would face quantitative limits on such activity, according to draft language on the so-called “Volcker rule” from the Obama administration.
The language maintains the toughest components of the proposal first floated in January, despite skepticism from lawmakers and the industry that such restrictions would do little to prevent another financial meltdown like the one that seized markets in 2008.
Banks would also be banned from investing in or sponsoring hedge funds and private equity funds, according to a draft version of the legislative language obtained by Reuters. A final version of the language is expected to be sent to lawmakers later on Wednesday.
The proposal would prevent a financial firm from acquiring another company if the resulting firm would have more than 10 percent of the liabilities of the financial system.
President Barack Obama announced in January that he would propose these limits, named after White House economic adviser Paul Volcker. Obama said additional safeguards were needed to prevent the build-up of risk in the financial system.
The announcement in January of the Volcker rule came months after the administration’s proposals in mid-2009 for other financial reforms, prompting Senate Banking Committee Chairman Christopher Dodd to complain that the Volcker rule was late to the show and looked transparently political.
PENPIX – Whom will Obama name to fill U.S. Fed vacancies?
WASHINGTON, March 3 (Reuters) – President Barack Obama is sifting through candidates for three vacant seats on the Federal Reserve Board, including the No. 2 spot that comes open when Vice Chairman Donald Kohn departs on June 23.
The White House on Tuesday said Obama will move quickly to fill the vacancies on the seven-person board.
The president’s picks will be in position to influence when the Fed raises interest rates and how aggressively it takes on its post-financial-crisis regulatory responsibilities.
With mid-term elections a possible referendum on his administration, Obama may aim for a Fed that pushes hard to reduce unemployment and clamps down on risky financial practices. But he must avoid rattling markets with nominees seen as giving insufficient weight to preventing inflation.
Following are possible picks for the vice chairmanship and the other two open board seats.
CHRISTINA ROMER
Romer is currently chair of the White House Council of Economic Advisers. A University of California, Berkeley economics professor before joining the Obama administration, Romer has written about the Great Depression and about the impact of tax policy on economic growth. Some observers believe it unlikely that Romer would take a board seat, unless it was the vice chairmanship that Kohn is vacating. A nominee closely associated with the White House could face stiff Republican opposition.
U.S. Fed Vice Chairman Kohn to step down, Obama gets chance to reshape
By Mark Felsenthal
WASHINGTON, March 1 (Reuters) – Federal Reserve Vice Chairman Donald Kohn, a 40-year veteran of the U.S. central bank, will step down in late June, giving President Barack Obama a chance to reshape the institution.
In a letter to Obama released on Monday, Kohn, who has served as the Fed’s No. 2 since June 2006, said he will depart when his current term as vice chairman expires on June 23.
“The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn for his invaluable contributions over 40 years of public service,” Fed Chairman Ben Bernanke said in a statement.
Kohn, 67, began his career at the Kansas City Federal Reserve Bank in 1970 and rose through the ranks to become one of the more influential vice chairmen in the central bank’s history.
He has served on the Fed’s Board of Governors since August 2002.
His departure would leave three seats vacant on the normally seven-person Fed board in Washington, giving Obama broad latitude to shape the Fed at a time lawmakers are considering lessening its power after the most damaging financial crisis in generations.
ANALYSIS – U.S. trader tax plan faces big hurdles
By Kim Dixon and Doris Frankel
WASHINGTON/CHICAGO, Feb 19 (Reuters) – The Obama administration’s proposal to end preferential tax treatment for derivatives traders — a move that critics say would raise the cost of trading — faces steep hurdles if it is ever to become law.
Among the obstacles standing in the way of the administration’s plan to increase taxes for derivatives professionals: a political stalemate in Congress, an influential lobby on Capitol Hill and the fact that the plan is not included in any financial reform legislation.
“I don’t think this has much of a chance at all — this is a very strong lobby and prior efforts have been roundly rejected,” said Anne Mathias, an analyst at Concept Capital.
The proposal would eliminate the treatment of booked profits for options market makers and futures professionals as capital gains, and instead subject them to much steeper ordinary income tax rates. The tax breaks were implemented when market makers were first required to mark their positions at year-end and pay taxes on booked profits.
The tax provision allows 60 percent of profits to be treated as long-term capital gains and the rest as short-term. That means that market makers pay a blended capital gains/ordinary tax rate of 23 percent of their income instead of up to 35 percent in 2010, or 39.6 percent as of 2011 if the proposal makes it into law.
Market makers are regulated firms that add liquidity on exchanges, taking the opposite side of customers’ buy and sell orders.
Obama stimulus plan halted economic freefall – White House report
WASHINGTON, Feb 16 (Reuters) – U.S. President Barack Obama’s $787 billion stimulus prevented another Great Depression while creating or preserving 2 million jobs, according to a White House report to be released on Wednesday.
The report, signed by Vice President Joe Biden who oversees how stimulus money is spent, stressed the depth of the crisis confronting Obama when he took office 13 months ago, as the President constantly reminds Americans in his speeches.
But it also highlighted Obama’s challenge of trying to cut a 9.7 percent jobless rate that has fueled voter discontent.
The report said the package of stimulus spending and tax cuts “clearly halted an economic freefall.” Obama will get the document at his economic intelligence briefing on Wednesday and he will speak about the economy to mark the anniversary of his signing of the American Recovery and Reinvestment Act at 10.25 a.m.
Opposition Republicans, as they have been doing for months, hammered the White House for what they called a “poorly conceived and badly executed” stimulus plan.
“Self-congratulatory ‘stimulus’ spin from this administration is hopelessly out of touch with reality and has about as much as credibility as prior claims that unemployment wouldn’t exceed 8 percent or that jobs would be created ‘immediately’,” John Boehner, Republican leader in the House of Representatives, said in a statement.
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