U.S.-based bankers shouldn’t worry too much about their bonuses. Even though Wall Street remains wildly unpopular and Washington needs more revenue, it’s unlikely U.S. authorities will follow their UK counterparts with a giant windfall tax on banker payouts.
I don’t see this happening in the US. I mean, the effort to raise taxes on private equity carried interest, while passing the House, is going nowhere in the Senate. And that is far less controversial and a less stupid idea. And remember how the 90 percent tax on AIG bonuses fell flat back in March. The one caveat, as Dan Clifton notes in an earlier post, here is that 2010 is an election year and the combo of big bonuses and high unemployment could cause endangered Ds to play the populist card and try something
If I made of list of factors contributing to the recession and financial crisis, Wall Street pay would come in around 6th, after 1) easy monetary policy; 2) TBTF; 3) US housing policy; 4) global savings glut/China labor shock; 5) Wall Street group think. Yet pay is where so much energy is being directed at this issue thanks to its populist appeal. America hates TARP so Washington needs to make amends by hammering execs at TARP recipients.
The Obama administration wants the Federal Reserve to be the maximum regulator of the American financial system. As Treasury Secretary Timothy Geithner told the Senate Banking Committee, “The Federal Reserve is best positioned to play that role. It already supervises and regulates bank holding companies, including all major U.S. commercial and investment banks.”