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Financial Services Update – Issue 3

Financial Services Update – Issue 3

January 29, 2010

Authored by: Matt Jessee

Bernanke Confirmed

On Thursday, the Senate approved the nomination of Ben Bernanke to chair the Federal Reserve by a vote of 77-23. His confirmation nonetheless drew a record-breaking level of opposition, four years after he easily passed through the Senate. Seven lawmakers voted to end the filibuster then pivoted to vote against the confirmation itself, which required a simple majority. Two noteworthy ‘no’ votes on the Democratic side: Sens. Barbara Boxer (D-Calif.) and Arlen Specter (D-Pa.), who both face difficult reelection fights. Some have speculated that the closer than expected vote may make it harder for Bernanke to defend the Fed as Congress prepares to intensify its oversight of monetary policy and curb the Fed’s authority over the banking system.

Jobs Bill

As the Senate works towards a “jobs bill” expected to be released next week, disagreement remains among Democrats as to what the bill should include. The House already passed a $154 billion stimulus plan in December, including an expansion of unemployment and health-care benefits, as well as new infrastructure spending. Senate Democrats have met resistance from moderates who object to such a high cost. Senate Majority Leader Reid is expected to announce a new proposal next week incorporating ideas from the Administration including shifting $30 billion from TARP and sending it to community banks for lending.

Geithner Testifies on AIG

During testimony and questioning Wednesday before the House Oversight and Government Reform Committee, Treasury Secretary Timothy Geithner defended his own performance and the actions of federal officials during the financial crisis more generally. “I was there; I know what I was responsible for. I take full responsibility and take great pride in those judgments,” Geithner said in testimony. “I hope you will give the same care and judgment to looking at those decisions in retrospect and with benefit of hindsight that we gave in making those decisions at the time.”

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Financial Services Update – Issue 2

Financial Services Update – Issue 2

January 22, 2010

Authored by: Matt Jessee

Obama Unveils New Regulations on Investment Banks

On Thursday, President Barack Obama unveiled a new set of proposals aimed at cutting the size and risk-taking behavior of the nation’s largest banks. The proposed restrictions includes size and complexity limits specifically on proprietary trading. The restrictions have been long advocated by former Federal Reserve Chairman Paul Volcker who chairs the President’s outside economic advisory board and met with the President before the announcement Thursday. The proposal could have the biggest effect on Bank of America Corp., Wells Fargo & Co., and J.P. Morgan Chase & Co., Goldman Sachs, Morgan Stanley, and Citigroup Inc.

Democratic Congressional Leadership Responds

In response to the President’s proposed new regulations, House Financial Services Committee Chairman Barney Frank (D-MA) said Senate Banking Committee Chairman Christopher Dodd (D-CT) would incorporate the restrictions into the Senate’s financial regulatory reform bill and that he (Frank) would push for the measures in conference committee. Frank also said the new restrictions would have to be phased in over 3-5 years to avoid ‘fire sales’ of bank divisions.

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Financial Services Update – Issue 1

Financial Services Update – Issue 1

January 15, 2010

Authored by: Matt Jessee

Obama Unveils Proposal on Bank Taxes

President Barack Obama unveiled a “Financial Crisis Responsibility Fee” yesterday, which, if approved by lawmakers, would go into effect June 30, 2010, and last at least 10 years. It would amount to 0.15% of total assets, minus high-quality capital such as common stock and disclosed and retained earnings. Insurance policy reserves and deposits covered by the Federal Deposit Insurance Corporation (FDIC) would not be taxed because such assets are already subject to federal fees. The tax would hit approximately 50 banks, insurance companies and large broker-dealers. Of those, approximately 35 would be U.S. companies, and 10 to 15 would be U.S. subsidiaries of foreign financial firms.

The tax is expected to raise $117 billion over 12 years, and $90 billion over the following 10 years. Approximately 60 percent of the revenue will come from the 10 largest financial firms. The White House plan excludes small banks and auto makers that accepted funds from the government’s Troubled Asset Relief Program. The banking industry strongly opposes the White House fee, calling it a political exercise that will stifle the economic recovery, force it to pay for the auto sector’s bailout, and ultimately burden consumers.

House Democrats Introduce 50% Tax on Bonuses

On Thursday, House Democratic lawmakers introduced a bill to slap a 50% tax on bonuses paid in 2010 by banks that took federal bailout funds. Rep. Peter Welch (D., Vt.) said the bonus tax proposal is “complementary” to the fee proposed by Mr. Obama.

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