UK banks warned to support lending over bonuses
- Source: Lending to businesses must come before bonuses, banks are warned The Guardian, August 2, 2010
Banks were warned last night that paying out big bonuses to their staff and large dividends to shareholders must not come at the expense of increasing lending to businesses and bolstering their capital bases.
As Lloyds Banking Group and Royal Bank of Scotland prepare to announce they have returned to profit after being bailed out by the taxpayer in October 2008, the industry faces repeated criticism that it is not lending enough to small business and paying out bonuses that are too big at a time when the economy is spluttering.
Kicking off with HSBC today, the UK banks are forecast to make combined profits of about 11bn and contribute as much as ?5bn into their bonus pools for payouts at the end of the year. Lloyds and RBS are banned from paying dividends by the EU because of the combined 75bn of taxpayer funds they have received but HSBC, Standard Chartered and Barclays are expected to promise payments to their shareholders.
The UK's biggest bank, HBSC, is forecast to make profits of $8.6bn (5.5bn), up from $8bn a year ago, according to analysts from UBS who also expect the bank to report its highest core tier ratio a key measure of financial strength for two decades. "For a deposit-funded bank with little interest rate risk on the books, we regard this as a 'gold standard'," the UBS analysts said.
They indicate that if HSBC keeps accumulating capital in this way it could actually end up holding too much cash.
While Barclays had a higher capital cushion than HSBC after the EU's "stress tests" on banks last month, concern about the ability of banks to lend and determination to pay bonuses remains.
Lord Oakeshott, the Liberal Democrat Treasury spokesman, said: "Every 1m that is paid out in bonuses is eroding banks capital from its prime job which is lending to viable businesses".
As the bank reporting season began the Treasury last night pointed to a series of warnings by City minister Mark Hoban and the Financial Services Authority in recent days to indicate that the banks' results would be scrutinised. Hoban has expressed concerns about the lack of lending and urged banks to restrain pay while last week the City regulator said banks should decide how much money to pour into their annual bonus pots on the basis of the amount of profit being made rather than the amount of the revenue generated, which is the current industry standard.
When business secretary Vince Cable published his paper on finance last week he also cautioned banks to be "very, very self-conscious" about their pay deals.
The bailed-out banks are particularly vulnerable to government warnings on lending to small businesses as they have been set combined targets of nearly 100bn to the end of next March. RBS is expected to say that it is on course to meet its target to lend 50bn while Lloyds will also be eager to demonstrate that it is channelling funds to small businesses.
RBS, which is expected to edge to a 200m profit in the first half after barely breaking even a year ago, insists that even while loans are being repaid by customers, the criteria for granting loans has not changed. Peter Ibbetson, small business chairman of RBS, said that the bank was continuing to approve every 17 out of 20 applications for a business loan the same rate as before the crisis.
"Demand is muted, though," said Ibbetson. Demand is down 25% and when loan applications are received, the amounts being asked for are 25% lower too.
While the bank had not altered its criteria for granting loans, Ibbetson said that RBS was increasingly scrutinising cash flows and management accounts in a way that might not have been so important in a more vibrant economic climate.
RBS has also set up a unit that can help businesses turned away for loans by offering them other support such as invoice finance and will today open a hotline to help new businesses get off the ground.
Last year banks which had not been bailed out by the taxpayers set themselves goals to achieve a certain amount of lending and may do so again. The British Bankers' Association said banks were "well aware of their responsibility to society".
BBA chief executive Angela Knight said the return of profitability should be seen as "a positive sign" for the wider economy and added the banks were intending to write to George Osborne to spell out their lending plans.
Lloyds is forecast to show a dramatic improvement in its profits, with the City predicting first-half profits of between ?800m to ?1bn ? compared with ?4bn losses from a year earlier. Analysts also believe that the retail banking units will show larger rises than the investment banking business which is expected to show a fall in profitability.
Barclays was one of the first banks to signal that investment banking revenues were slowing when it said that market conditions in May and June had been "softer".
Even so, its investment banking arm is expected to set aside more than 40% of its revenues to pay out in bonuses at the end of the year.
Barclays' dividend is forecast to be 2p against no payment a year ago.
France to tax banker bonuses
- Source: Mon dieu! France to tax banker bonuses Levy will raise $523M this year, says country's finance minister Associated Press, January 12, 2010
France will raise about euro360 million ($523 million) from its tax on bankers' bonuses, the finance minister said in an interview published Tuesday.
The 50 percent bonus tax that France is putting in place this year will hit about 2,500 bankers, traders and other finance professionals, Christine Lagarde said in an interview with Le Figaro daily.
Lagarde justified the tax by saying it is the billions of euros in state aid that France provided its banks at the height of the global financial crisis which allowed the banks to resume making profits in recent months.
"In these conditions, it is justified that the French get a share of these results," Lagarde said.
The tax is also meant to "send a signal to the banks, to prompt them to finance the economy, to use the capital they have to make loans, and not to pay out extravagant compensation," Lagarde said.
Of the funds raised by the tax, a large majority — euro270 million — will be put into a French fund that guarantees retail deposits up to euro100,000. The rest will go into the general government account, Lagarde said.
Last month British Prime Minister Gordon Brown and French President Nicolas Sarkozy agreed to slap a 50-percent tax on performance pay. German Chancellor Angela Merkel also embraced the idea.
Earlier, France had already issued new rules to all banks operating in France — including foreign banks — that limited bonuses. The rules will force banks to spread out compensation over several years to assure that pay reflects long-term performance and doesn't reward risky decisions that soon turn bad. At least half the bonus will be withheld, to be paid over three years depending on overall performance.
Bankers threaten to reduce London operations
- Source: U.S. Bankers Are Fed Up With British Regulations New York Times, January 10, 2010
A tough new requirement by Britain’s securities regulator that top banking executives and earners must defer 60 percent of their total compensation for a three-year period is pushing some American banks with extensive London operations to say that they just won’t take it anymore.
Their taxes are on the rise, they have become political piñatas and now, just as one of the richer bonus seasons in recent years gets under way, they are being told by regulators how to pay — or not to pay, to be precise — their employees.
About a month ago, the Financial Services Authority, which last year became the first regulator in the world to announce specific plans to rein in compensation, told the 26 banks it regulates that any executive, trader or banker who was to receive a bonus of £1 million or more would be able to make immediate use of only 40 percent of that reward.
The rest would be deferred for three years, with further restrictions limiting when and how much bankers can cash in.
On the surface, the guidelines are not altogether inconsistent with a growing trend in banking to extend the vesting periods for stock awards in an attempt to dissuade employees from making dangerous bets with the company’s capital for short-term profit.
But, coming as it does after a wildly unpopular move by the British government to impose a 50 percent tax on banker bonuses, this new intervention is being considered by some as a final straw of sorts.
As a result, a number of foreign banks operating here — JPMorgan Chase and Goldman Sachs in particular — have begun to reassess their once cast-iron commitments to using London as a major financial hub and operations center.
“It is very dangerous to lead the pack in regulation like this,” said Stuart Fraser, the policy chairman of the City of London, as the hub is known. “You can only push people so far.”
Late last year, the JPMorgan chief executive, Jamie Dimon, called Britain’s chancellor of the Exchequer, Alistair Darling, to voice his displeasure over the tax — the only head of an American bank to make such a call, people at the British Treasury said.
During the conversation, Mr. Dimon said that JPMorgan, which employs 15,000 people in Britain, was not just a significant taxpayer but was also making a $2.4 billion investment in Canary Wharf and that it had not taken a penny of government aid.
The conversation was first reported by The Daily Telegraph and received considerable attention in London, with some arguing that it was an early indicator that increasing regulation was going to induce banks to take their business elsewhere — to Geneva, New York, Frankfurt or Singapore.
But the situation is far more complicated than that.
A person who was briefed on the conversation said that while it was true that JPMorgan, as with most banks, was furious over the tax, the conversation between Mr. Dimon and Mr. Darling was civil and did not represent a threat that the bank would pull back from its Canary Wharf project.
In fact, there were other reasons before the tax was announced that made the building project less than attractive for the bank — namely that the bank had laid off thousands of employees since the project was conceived in 2008 and no longer needed such a large space.
Still, even if unspoken, the message behind the call was clear: There is a limit to what banks will accept as the price of doing business in Europe’s premier financial center.
To be sure, bankers are often noted to be the best of blusterers. It is one thing for a strategy committee to study the feasibility of moving part of a bank’s business to an alternative locale, as Goldman Sachs has done. It is quite another matter — logistically and financially as well as culturally — to move, say, 2,000 bankers and operations staff members to another European city, no matter how appealing it might be for their bonus pay.
“You have 25-year leases and kids in school,” said Andrew Hilton, who runs CSFI, a London-based research center that focuses on financial issues. “It is hard to see a bank rethinking the whole thing.”
Bankers everywhere are a favorite punching bag, especially now with bonuses expected to be high and perceptions increasing that loose money and a quick return to profitability are spurring a return to the type of risk-taking that led to the global financial crisis.
But Britain, despite its heavy reliance on the financial sector to drive its economy and generate tax revenue, is one of the few places that has actually taken concrete steps against banking excesses.
And with regulators in neighboring European capitals, to say nothing of New York itself, increasingly likely to follow London’s lead, there may not be many places for banks to hide.
“The U.K. may be ahead, but it is not the only one going in this direction,” said Lucian A. Bebchuk, a professor of finance at Harvard and an adviser to the United States Treasury on compensation. “This is a consensus view all over the world.”
Reduce bonuses and create "virtuous cycle"
- Source: Bank of England expert calls the bankers' bluff The Guardian, December 20, 2009
"... I'm not sure what the optimal size of the financial sector is, but given that taxpayer bailouts are an integral feature of the industry, occurring periodically and costing more each time, it is not in the least obvious that bigger is better.
Proportionately, public sector interventions in the UK during the financial crisis were much larger than in the US or the euro area, reaching more than 70% of GDP this year. The problem with relying so heavily on financial services is that we are hanging our national fortunes on a sector that is potentially very lucrative, but also ruinously risky. Health, not size, is key.
Haldane's comments are not only interesting in themselves, but because they appear to be a harbinger of a tougher stance. The Bank of England's latest financial stability report urges the banks to replenish their capital now, while the sun is, if not shining brightly, at least casting a few wintry rays.
It wants to see them start a virtuous circle, by retaining more capital instead of paying bonuses and dividends. That would send down the cost of funds, which in turn would get credit flowing more easily through the economy. Non-financial companies would then perform better, resulting in lower loan losses for banks.
In the long term, everybody's happy. In the short term, bank shareholders will squeal – share prices have already fallen in response to Alistair Darling's bonus tax – and the bonus lobby will cry that it is infringing their basic human right to the moolah.
The Bank's exhortations come against a background of international reform. The Basel committee on banking supervision is suggesting a series of measures, including proposals that would limit the ability of banks to pay bonuses and dividends if their capital dropped close to the minimum required.
The system looks more stable and more resilient than it did six months ago, but there is a very difficult road ahead. Next year, we can expect progress on an international level on improving the regulation of capital and liquidity.
It will take longer to resolve two parallel debates: the first is around dynamic provisioning – or whether central banks can let the air out of bubbles before they burst, by insisting that banks build up cushions of capital in the good times to soften their landings in the bad. The second is about firms that are too big to fail: how they can be wound up with the least possible damage, and whether there should be a separation of utility banking from the casino variety, as I have advocated, and far more importantly, as has the Bank's governor, Mervyn King.
People are calling this an "ice age" for bankers, but it is blatantly premature for them to be receiving bonuses off the back of free money injected by central banks, at a time when there are still enormous risks. As I have written many times, some individual households are very highly leveraged and vulnerable to a rise in interest rates. Potentially bad loans in the commercial property sector are looming like a black cloud: £160bn of loans are due to be refinanced by 2013. So far, we have only had a liquidity crisis – the real credit crisis is yet to happen."
France and Germany back UK bonus tax
- Source: France and Germany back UK bonus tax The Guardian, December
Gordon Brown claimed a victory for the government tonight after securing the support of France and Germany for its supertax on City bonuses amid signs that major Wall Street firms were attempting to prevent a similar clampdown by the Obama administration.
Goldman Sachs, the highest profile firm on Wall Street, became the first to blink in the face of the public outcry over its expected handout of ?14bn in pay and bonuses this year, by suspending cash bonuses for its top 30 executives.
The decision, which will affect six of its executives in London, is expected to set the tone for rivals on Wall Street and could send ripples across the Atlantic. It is believed to be among the options being considered by Barclays as part of a review of remuneration.
The warm international reception for Brown's bonus tax held out the prospect that the prime minister could secure a much-needed political boost, as he did when other countries followed his lead on recapitalising the banks last year.
The momentum building up in Europe behind the clampdown on bonuses followed conversations between Treasury officials and those in G7 countries on Wednesday after the pre-budget report outlined the 50% tax on bankers' bonuses of more than ?25,000.
President Nicolas Sarkozy of France decided to follow the UK in imposing the one-off penalties on bonuses over ?27,000 after weeks of feuding between London and Paris over the regulation of European markets.
He had met Brown in Brussels today on the fringes of an EU summit to bury the hatchet after co-authoring an article calling for a global deal on the way banks behave.
Chancellor Angela Merkel of Germany also sounded sympathetic to the British initiative. She said it was a "charming idea" and showed how others could "learn from the City of London".
While a Downing Street spokesman appeared optimistic that Germany would also follow suit, senior German sources cautioned that despite the sympathetic noises from Berlin, Merkel would not, for legal reasons, be able to replicate the banker-bashing.
Brown said: "I think the French agreement to support what we are doing on one-off bonuses is very important. There is a one-off national insurance premium to be paid by the City, and that will happen in France as well.
"I believe other countries will now want to look at it and we have also an agreement in the international community to look at the relationship between banks and the service they owe to society. France is very supportive on that. The debate in the international community will move forward."
Merkel prefers a Tobin-style tax on financial transactions, which Brown is attempting to persuade major leaders to endorse.
In a letter to the other 26 EU heads of government, Brown said: "The EU should work actively with our international partners to develop proposals to ensure a better balance of risks, rewards and responsibility between society and the financial sector."
The US administration is opposed to a Tobin tax but is facing calls to copy the UK's payroll tax on bonuses ? a move that has been greeted with concern in US banking circles.
"Goldman Sachs is worried. They're worried about the public reaction to bonuses they're paying in the worst recession since the war," said Alan Charney, programme director for US Action, a union-backed campaign group.
The US treasury declined to comment today on its view of Britain's tax on bonuses, although a handful of left-leaning members of Congress have called for a similar levy in the US.
Total bonus payouts on Wall Street are due to rise by 40% to $26bn this year. The Obama administration has appointed a so-called "compensation tsar", Kenneth Feinberg, to examine pay policies, although his remit extends only to banks being propped up by bailout funds.
Steve Hall, a New York-based pay consultant who advises American companies on devising remuneration, said there was concern at the prospect of Brown's tax gaining international impetus after France's decision to follow Britain's lead: "This is spreading ? this is worse than swine flu."
In lieu of cash payments, the Goldman executives will receive shares. Under enhanced "clawback" powers, the bank will be able to reclaim shares from any employees found to have inflicted "material financial harm" on its businesses. And in an unprecedented move for a major US bank, Goldman will put its remuneration policies before a yearly "say on pay" vote by shareholders at its annual meetings.
A Goldman spokesman said the bank had taken public opinion into consideration: "The motivation was that these are extraordinary times, that the firm has done well and that that has excited a great deal of comment and not a little criticism."
Before the financial crisis hit, Goldman's chief executive, Lloyd Blankfein, was the best-paid bank boss on Wall Street, taking home $68.5m in 2007, while two of his top lieutenants earned $67.5m each. The US treasury secretary, Timothy Geithner, recently pointed out that Goldman would have collapsed had it not been for the US government's support of the industry.
President Obama will host a meeting at the White House on Monday with banking chiefs including the heads of Goldman, Citigroup and Bank of America, where pay policies are sure to be on the agenda.
In the City, warnings that the tax would result in an exodus of star players were matched by those insisting that the supertax would be easy to dodge.
Trichet joins the chorus of criticism
- Source: European Central Bank chief warns against 'self-serving' bonus culture The Guardian, December 12, 2009
European Central Bank chief Jean-Claude Trichet joined the chorus of criticism against bankers today by warning that big bonuses awarded to them could help sow the seeds of a future financial crisis.
Speaking in London, the Frenchman said that a culture of excessive financial rewards for individuals encouraged "self-referential" and "self-serving" banking, adding that banks should concentrate on rebuilding their capital bases rather than simply pay out "unwarranted" levels of compensation.
One particular concern of the ECB is that the actions taken by central banks and governments have encouraged bankers to believe that a worst-case scenario will always be averted – known as "moral hazard".
Political pressure is growing across Europe to clamp down on banks following the British government's proposal to tax bonus pools.
Trichet has often called on banks to use the improvement in world stock and other markets to increase their resilience to future shocks rather than just dole out the money in bonuses.
"I will say that the so-called bonus culture is one of the many factors that can drive the financial system in the wrong direction – away from intermediation to self-referential speculation; away from medium-term stability to short-term orientation; and away from being a service sector to being a self-serving sector," he said.
Trichet repeated that the risks to the financial system from the crisis meant that Europe needed a new supervisory framework.
10 bankers a week leave the U.K.
- Source: Hundreds of bosses flee UK over 50% tax Times Online, December 13, 2009
Britain’s financiers and entrepreneurs are quitting the UK at a rate of 10 a week to avoid Labour’s new 50% taxes.
The burgeoning exodus threatens to deepen a £178 billion black hole in the public finances and leave middle-class voters with higher taxes for years to come, figures obtained from Companies House reveal.
The number of directors of British businesses registered as living in the low-tax centres of Jersey, Guernsey or the Isle of Man has risen by almost 500 to 6,729 in the past 12 months.
The British Virgin Islands is also a popular destination, with 615 directors of UK companies now based in the Caribbean tax haven — an 18% rise on a year ago.
Those known to be fleeing the UK include hedge fund managers, property tycoons, bankers and people who made their money setting up companies organising private healthcare, call centres and luxury holidays.
“The UK model is broken,” said Stephen Hedgecock, a partner in Altis, a £1 billion hedge fund company with 35 staff that has relocated to Jersey, leaving only a small presence in London.
“It’s not just the 50% rate — it’s National Insurance, the treatment of pensions ...everything. It’s just a ridiculous amount of taxation.”
Russell Newton and Danny Masters, co-founders of Global Advisors, another hedge fund with hundreds of millions of dollars under management, also abandoned London for Jersey’s thriving finance community in the summer.
Another 100 Britons have begun working in the island’s businesses since the downturn began two years ago. The Jersey government said it had seen a 20% increase in interest from people looking at moving to the island. A new marketing brochure published by the island’s authorities promises “in Jersey, keep more of what you earn”.
The authorities impose corporation tax at 10% and income tax at 20%. There is no inheritance tax or capital gains tax. Property taxes are also low.
Jersey Finance, an agency set up to attract financial talent to the island, has held a series of private dinners in London to woo new residents. Geoff Cook, the agency’s chief executive, said: “The 50% tax rate does seem to have been the tipping point for many people.” However, the island’s authorities maintain that the rich often favour Jersey because of the easy access to London, the sandy beaches, low crime rates and the use of English as the first language.
“There is a lot of interest right now,” said Nigel Philpott, the Jersey government’s head of high net worth residency.
“Last year I was getting one or two calls a day from people who wanted to come and join us. Now I get four or five on some days.”
Paul Bater, 52, a former bank manager from Swansea, is so happy with his move to Jersey that he has allowed himself to be used as a case study in promotional literature for Jersey Enterprise. “I love living in Jersey. The pace of life is much more civilised than anywhere else I have worked,” he said.
John George, the owner of Jag Communications, the UK’s third biggest mobile phone retailer, has moved to Guernsey, Jersey’s neighbour.
The 48-year-old businessman now commutes by private plane to his company’s office at Perranporth, Cornwall. The journey takes just 30 minutes — and ends at his privately owned airfield.
“It’s very easy, very straightforward and I never get stuck at the lights or any of that,” said George. His office is fewer than five minutes from the airfield.
His wife Susan, who joined Jag’s board in March, is one of 498 directors and partners of UK companies identified on a list from Companies House of those who now give their addresses as Jersey, Guernsey or the Isle of Man. A further 91 UK companies have registered in these islands in the past year. The research also includes islanders who have joined the boards of British firms in the past year.
The tally, assembled by Philip Beresford, compiler of The Sunday Times Rich List, represents one of the first attempts to quantify the scale of the exodus.
For years considered little more than family holiday resorts, Jersey and Guernsey have become a playground for the rich in recent years, with Michelin-starred restaurants, luxury spas and hotels. Almost one in five of the island’s workers has a job in financial services. There are nearly 3,000 experts who help people set up trusts and companies — a rise of 12% since the onset of economic downturn.
It is a similar situation in the Isle of Man, which says it has seen a 20% growth in the non-banking financial sector.
The influx has also proved lucrative for Jersey’s estate agents. James de la Cloche, director of Edge, a property consultancy, said: “We love Gordon [Brown] and Alistair [Darling] over here — we rather hope they get another term.”
Meanwhile, City bankers and dealers are turning to libel and privacy lawyers to try to stop the media scrutinising their earnings, assets and lifestyle. Bankers say the row over their bonuses means they are seen as targets.
They complain of being pursued by paparazzi, of reporters trawling through their social networking sites and long-range telephoto lenses being trained on their living rooms.
==Deutsche Bank to ‘globalise’ bonus pain
- Source: Deutsche Bank to ‘globalise’ bonus pain Financial Times, December 17 2009
Deutsche Bank will spread the pain of Britain’s controversial supertax on bankers’ bonuses among its staff around the world, becoming the first leading international group to spell out how it will deal with the financial hit.
“We will clearly globalise it,” Josef Ackermann, Deutsche’s chief executive, told the Financial Times, in remarks that risk angering staff outside London. “If parts [of the cost of the tax] are paid out of the bonus pool, we would seek to globalise it. It would be unfair to treat the UK bankers differently.”
A number of US banks are considering similar measures, spreading the effects of the tax among shareholders, UK employees and staff around the world despite fears that such a response could upset bankers outside Britain.
Alistair Darling, the UK’s chancellor of the exchequer, last week announced a surprise 50 per cent supertax to be levied on banks’ bonus pools, in an effort to curb banker remuneration. The year has seen profits artificially buoyed by the direct and indirect benefits of government bail-outs.
But Mr Ackermann said he opposed government interference in setting pay. “Bonuses should be the result of supply and demand for skilled people,” he said.
The industry is furious about the levy. If its cost is passed on to bankers, bosses say they are trapped in a Catch-22 situation: either UK bankers feel disgruntled at being paid less than their US peers, say, or New York bankers are punished indirectly by the UK government. Some tax experts have suggested the affair could spark a transatlantic political dispute.
Mr Ackermann admitted that the German bank’s investors could end up taking some of the hit. “We will monitor what [other] banks are doing, how much of the cost will be borne by staff and how much will be taken by shareholders. That is absolutely undecided.”
In a separate interview, Eric Daniels, chief executive of Lloyds Banking Group, warned that the supertax could harm London in the same way that the US crackdown after the Enron and WorldCom scandals hit New York’s status.
“Some would say that the Sarbanes-Oxley legislation in the US basically caused a ripple effect of people saying ‘well not only is this an onerous requirement so would I want to list here but also, if this can happen what’s going to be the next step?’,” he told the FT. The bankers’ comments came as the Basel Committee on Bank Supervision, the global regulator, announced tough new measures to promote bank strength.
New York Times endorses banker bonus tax
- Source: Taming the Fat Cats New York Times, December 19, 2009
President Obama seems genuinely, if belatedly, upset about the way America’s voracious bankers leveraged hundreds of billions in taxpayer bailouts to line their pockets with multibillion-dollar bonuses while American businesses starve for credit.
Before he gets over his anger, he might want to take a look at how the British found a way to realign the fat cats’ boundless greed with the public interest: slapping a hefty windfall tax on their bonuses. He still has time to push Congress to enact a similar levy here.
Bankers have rushed to repay their bailout loans to the Treasury so they can avoid the constraints on compensation that came with the assistance. Unshackled, they are putting together bonus pools for 2009 that would rival the record-breaking packages of 2007 — the year before their foolhardy bets tipped the world into its worst economic crisis since the 1930s.
The administration can make a very good case that the Treasury is entitled to much of this money. After all, what profits the banks have made over the last year were funded by oodles of cheap financing provided by the Federal Reserve. This is a windfall that they should not be allowed to keep.
NY lawmakers resist banker bonus tax
- Source: Banker bonus tax like Britain's not favored by New York lawmakers The Hill, December 12, 2009
"An excise tax on banker bonuses would unfairly target New York and reduce its state tax revenue, lawmakers from the Empire State said Friday.
Europe has taken flight with the idea this week, with British Prime Minister Gordon Brown saying his government will impose a one-time 50 percent surtax on banker bonuses. French President Nicolas Sarkozy has said his country will look into a tax as well.
But the idea still seems unlikely to cross the Atlantic, as the Obama administration backed away from endorsing the tax during international talks earlier this year.
Further, New York members would likely form a bulwark against any legislation that would tax banker’ bonuses.
“We are already hitting them pretty hard,” said Rep. Anthony Weiner (D-N.Y.). “I would be against that as much as Congressman [Dave] Obey [D-Wis.] would be against a dairy farmer tax.”
Lawmakers from New York raised a host of problems that could stem from such a tax.
They believe it could prompt bankers to flee Wall Street to other countries that would not limit their pay. In addition, it could cut into the state’s own tax revenue since banks could reduce bonuses to avoid the tax, leaving less money to be taxed under the state’s income tax..."
- Bank bonus tax is unjustified, financial practitioners claim Bobsguide, 7 January 2010
- London Exodus to Geneva Runs Into Housing, School Shortages Bloomberg, Dec, 21, 2009
- Ackermann Sees German ‘Advantage’ Without Bonus Tax Bloomberg, December 12, 2009
- France Said to Consider Following U.K. Bank Bonus Tax Bloomberg, December 10, 2009
- Goldman Sachs Alters Its Bonus Policy to Quell Uproar New York Times, December 10, 2009
- U.K. to Levy 50% Tax on Bank Bonuses Exceeding 25,000 Pounds Bloomberg, December 9, 2009
- Switzerland looks to lure disaffected bankers with tempting tax laws The Guardian, Dec 7, 2009