Life As It Goes By

Captain America, leading Uncle Sam, had responded to the nonsense from the brash Wall Street fighters. Slamming a 10-year 50% tax on banks was really something I had in mind as well. However, I still feel the range should be extended to the individuals that receive the sky-high bonus. A 50% income tax on their bonuses is still way too little for the kind of risks (unless a life is cost less than trillions of dollars) they have taken for the past year.

I don’t expect this to end so quickly. That gotta be some kind of retaliation, given the fact these bankers had been so well fed with silver spoons. Besides, they are elite, top of the minds. They will come up with groundbreaking schemes like those in the derivative products they sold. Unless they wise up and keep their mouth shut. In this way, the damage shall be limited just to the banks, not the individuals. They will win most in this option. This is why I propose President Obama to launch a second attack with the income tax.

Yes, we do want to corner them and give them really a hell of time. We badly need some discipline in the house. The financial crisis has hit us hard and painfully. We should not forget this and so should they not. If this crisis is to be labeled as a classic excuse of being the norm of economic cycles or trends, then let regulation be a new lesson of uncertainty. Yes, they are going to be so screwed that they will regret what they have done for the making of the crisis. They would want to change industry and not work in this line any more. Yes, we are going to come so hard on them that they would have nightmares every nights, worrying about the unethical deals they have committed during the day.

In reality, here are a few things that I feel will follow suit: rise in stock market, poor quarterly results for banks (blaming government actions have severely demoralized the spirits in the banks) and acquisitions. The rise in stock market means a transfer of funds from the hard cash to paper profit or loss. Of course, it is not just limited to the stock market. Any market that is capable of giving returns of investment shall be affected: currency, bonds, commodities, ETFs and so on. This is only the short term strategy. To get these money back after only 10 years, it will be an unsound investment. In the meantime, there will be lots of political lobbying around to try to shorten their sentence. Money is power and banks have plenty of them.

Any investors would think of a long term plan. At this juncture, they have a choice of stating their true financial status now (and hence justify the levels of their current bonus) or report a much lesser value, keeping a portion for the future. Those banks on the borderline  ($50 billion) could save themselves by not joining the leaders of the herd. Those leaders might want to take a gamble and go for it this round. No one will ever know when such opportunity will knock again. Besides, first time offenders might take a lighter punishment or let off unnoticed. But it is still a 50-50 game. If they do think long, they will find ways to produce 2 quarters of rather disappointing results to avoid a repeat next year.

One best way of spending is to acquire big. This will slow the whole growth while keeping the stock price up. What this brings would be laying off of staff in banks and less consumer choices. The smart ones are already doing that now. And while we are talking about banks all this time, the tax proposal by President Obama include other financial institutions such as insurance companies.

This is assuming no big reactions from the those involved in this tax proposal which will only come into effect in June. Since it is based on the past year’s books (unless I got it all wrong), I believe the effect will remain. There got to be a way to bypass the tax restrictions imposed. With their clever minds, they will soon come up with something. Benefits-in-kind can include stuff such as properties, stock options/shares themselves and all kinds of big-ticket items. As for the companies themselves, they can break into smaller parts, so that none falls into the category of “above $50 billion”. Basically, options are plentiful.

It will be more than just a chasing game. It’s life and death. These monies or bonuses are the blood of these people and they will do anything for them. Expect the best, the very best from them to get back what they feel they deserve.