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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (39428)	12/9/2009 9:28:19 PM
From: Peter Dierks	2 Recommendations Respond to of 71588

Wall Street Reform Hits Main Street A bill in the House threatens to impose a massive tax on America's most successful companies by subjecting them to bank-style regulation. DECEMBER 9, 2009, 1:22 P.M. ET. By GREGORY ZERZAN This week the U.S. House of Representatives will vote on a bill purporting to address the causes of last year's market collapse. The "Wall Street Reform and Consumer Protection Act of 2009" aims to fix the problems that led to widespread and unprecedented government bailouts. One might expect such legislation to be focused mainly on the banks that were the nexus of the turmoil and recipients of so much taxpayer cash. But in reality the "Wall Street reform" bill isn't about them. Instead the bill threatens to impose a massive tax on America's most successful companies by subjecting them to bank-style regulation. Consider the marquee aspect of the bill: creation of a "systemic risk regulator" to oversee companies that are so big and interconnected that their failure could endanger the entire economy. Addressing the danger that one company's default might bring down the whole system is a sensible one; after all, this threat was the justification for the Treasury handing out hundreds of billions of taxpayer dollars in TARP money. Of course, the reality of that threat remains unclear. Lehman Bros. was allowed to go bankrupt without any of its major counterparties doing likewise. AIG, on the other hand, was rescued and thus the possible impact of its bankruptcy will never be known. But in any case, it was clear that the crisis of '08 was a financial crisis—banks and trading firms were heavily leveraged and exposed to one another, and this interconnectedness brought with it the risk of a contagion effect. Strange, then, that the legislation currently under consideration isn't limited to these firms. Instead it will apply to a whole host of companies engaged in routine, non-banking commerce. The bill would give the systemic risk regulator sweeping authority over "financial companies," a term broadly defined to include any corporation involved "in whole or in part, directly or indirectly, in financial activities". In the world of banking regulation "financial activities" encompass more than taking deposits and making bank loans; they also include extending other forms of credit, holding assets in trust for another or guaranteeing against loss, all things thousands of American non-bank businesses do on a daily basis. Examples include a company that ships its product to a customer without demanding payment up front, holding money for its customers as a deposit for unfinished goods, or offering a revolving credit facility to a supplier. "Financial activities" thus include ordinary commercial practices in corporate America, and not just what banks do. But any company engaged in these routine activities, even if just in part or indirectly, is potentially subject to an entirely new, costly regulatory regime. Any non-bank company that is identified by the government as too important to the economy immediately becomes subject to government inspection, supervision, and the requirement that it set aside capital in reserve based on decisions by regulators rather than businessmen. This means that the most successful American manufacturers and service providers would be forced to hoard cash instead of using it to employ Americans or develop new, innovative products. For a company that the government views as too systemically important, there is no way out. The bill explicitly requires any non-bank "financial" company to submit to Federal Reserve and Federal Deposit Insurance Corporation regulation as if it were a bank holding company. This means that America's most successful companies will become subject to the same type of banking regulation that applied to many of the true financial institutions that were at the heart of the recent market crash. Given that the bill is well over a thousand pages, it contains other proposals with far-reaching consequences as well. In the area of derivatives the legislation would require any company that uses the contracts, even purely to hedge its operational risks, to submit to regulation if its derivatives positions could expose the company's counterparties to "significant credit losses," as defined by the regulators. The bill is not clear on exactly how many companies will end up becoming subject to these new regulations, but energy companies, large manufacturers and even some retailers are likely to fall into the mix. Among the other consequences, these companies will also be forced to put aside otherwise productive capital to appease regulators. The legislation would bring entire sectors of the economy under federal regulation for the first time and mandate sweeping changes in how American businesses operate. Meanwhile, it does remarkably little to change banking regulation. Under the guise of financial reform the so-called Wall Street reform legislation threatens to impose massive costs on many of America's best performing non-financial companies. With the economy still struggling and the unemployment rate hovering around 10%, diverting capital from hiring workers to paying regulatory costs seems like a counterintuitive approach to recovery. The proposed legislation doesn't really address Wall Street; instead its impact lands squarely on Main Street. Mr. Zerzan was a previous Acting Assistant Secretary and Deputy Assistant Secretary of the Treasury.

To: Peter Dierks who wrote (39428)	12/10/2009 11:58:46 AM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 71588

Americans Want Government to Spend for Jobs, Send Bill to Rich By Mike Dorning and Catherine Dodge bloomberg.com Dec. 10 (Bloomberg) -- Americans want their government to create jobs through spending on public works, investments in alternative energy or skills training for the jobless. They also want the deficit to come down. And most are ready to hand the bill to the wealthy. A Bloomberg National Poll conducted Dec. 3-7 shows two- thirds of Americans favor taxing the rich to reduce the deficit. Even though almost 9 of 10 respondents also say they believe the middle class will have to make financial sacrifices to achieve that goal, only a little more than one-fourth support an increase in taxes on the middle class. Fewer still back cuts in entitlement programs such as Social Security and Medicare or a new national consumption tax. These long-standing contradictions in voters’ attitudes toward taxes, spending and the deficit are intensified as the U.S. grapples with the most severe economic crisis in decades, says J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey. The rich have become an especially inviting target as the combination of a bank bailout and big bonuses stoke resentments, she says. “People are hurting,” Selzer says. “They want anything that can help and not hurt them more.” “It’s hard enough just to get by,” says poll respondent Trevor Wofsey, 32, a postal carrier in Big Pine Key, Florida. “We’re being cut at every level: There are less hours at work and they want us to pay more into medical. Food is up, gas is up.” Obama Jobs Initiative The findings are in tune with the job-promotion initiatives President Barack Obama announced Dec. 8, as well as the administration’s assurances it will address the deficit, and proposals from some Democratic lawmakers to raise taxes on the wealthy. The difficulty of reconciling public demands for government action on jobs while at the same time reducing the deficit is shaping up as a major political theme ahead of the 2010 midterm elections. Obama and Democrats in Congress confront an unemployment rate that was 10 percent for November and a deficit that is forecast to be more than $1 trillion over each of the next two years. While the public sees both unemployment and the deficit as a threat, anxiety over unemployment is higher. Eight out of 10 poll respondents rate unemployment a high risk to the economy in the next two years and 7 of 10 say the same about the deficit. Infrastructure Spending The poll contains some of the features Obama announced in his jobs plan. Two-thirds of Americans back boosting spending on infrastructure. Six of 10 also support more spending on alternative energy to stimulate job growth, another measure Obama announced. “The best thing we could do is take some public money to rebuild our infrastructure and improve it,” says poll respondent Richard Kellaway, 75, a Unitarian Universalist minister who lives in Dorchester, Massachusetts. Unemployed people “could be put to work in a matter of days.” Americans support a range of other potential new government initiatives presented as employment programs, with ideas from both parties backed by wide majorities. An across-the-board tax cut, a favorite of some Republicans, also is supported by 6 of 10 Americans. A tax credit for businesses that hire new workers, which Obama favored as a presidential candidate and this week proposed in a limited form available only to small firms, gains backing from 7 of 10 Americans. Skeptical About Results Americans support the proposals even as they express doubts the federal government will help cut joblessness. A 51 percent majority say they are pessimistic about the prospects. When it comes to the deficit, they are more distrustful: 61 percent say they are pessimistic the government will bring down the budget shortfall. Nearly 9 out of 10 Americans say the middle class will have to make sacrifices to cut the deficit. That doesn’t mean that they are ready to embrace the idea. “With the middle class making more sacrifices than they are already making because of what the government ran up, it’s going to eventually leave the middle class at the bottom,” says poll respondent Laisha Wright, 25, an unemployed resident of Columbus, Ohio. The wealthy would be better able to bear the burden of more taxes, she says. “I don’t think it would be a big issue for them.” Across Party Lines The appeal of taxes on the wealthy crosses party lines. About half of Republicans back the idea and it is more popular among Democrats and independents. House Democrats have proposed surtaxes on the wealthy to pay for the health-care overhaul and the decision to send an additional 30,000 troops to Afghanistan Obama announced last week. Obama made tax increases on the wealthy a theme of his presidential campaign, promising to roll back the Bush administration’s tax cuts for families that earn more than $250,000. White House Budget Director Peter Orszag has promised to produce a budget that will cut the long-term federal deficit, and Senate Budget Committee Chairman Kent Conrad, a Democrat from North Dakota, is pressing for a bipartisan commission on deficit reduction. The poll shows that an across-the-board 5 percent cut of all discretionary government spending also attracts support as a deficit-reduction measure, with 57 percent saying they would back it. Majorities of poll respondents also say some big government programs either are not justified or could be cut. They included the $700 billion rescue of the nation’s banking system, the auto industry bailout, Iraq War funding, the $787 billion economic stimulus package and funding for the Afghanistan War. Cuts in funding for the Medicare prescription drug program would be resisted by 71 percent. To see methodology and exact question wording, click on the attachment tab at the top of the story. To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net; Catherine Dodge in Washington at cdodge1@bloomberg.net Last Updated: December 9, 2009 18:00 EST