By Ian Swanson - 01/20/10 01:00 AM EST
The financial industry won’t be shy in fighting a new fee proposed by President Barack Obama that could strip as much as $2 billion from some balance sheets.
The industry sees the fee as an unjust punishment on firms that have paid back money received from the government under the $700 billion bailout with warrants and dividends. The Treasury Department has estimated it has earned a 14 percent average return on money repaid from the banks, and projects a $19 billion profit.
“We’ll focus on the negative economic effects the tax will have on the economy,” said Scott Talbott, senior vice president of the Financial Services Roundtable.
Faced with arguments that Wall Street’s profits soared in 2009 because of the help of taxpayers, banks, insurers and others hit by the fee will remind lawmakers that big banks not only paid the government back with interest, they did it far earlier than expected.
They’ll also point out that General Motors and Chrysler may never be able to pay the taxpayer back. Yet those companies would not be subject to the new fee.
Industry sources charge the arbitrary nature of the fee is further exemplified by the fact that a number of companies that did not take money from the Troubled Asset Relief Program (TARP) could end up paying the new fee.
Wall Street knows it’s in for a tough slog. The industry’s reputation is in the gutter because of the financial crisis, and bonus season isn’t helping. Obama essentially declared it public enemy No. 1 in a series of fiery remarks last week.
To win, the industry will focus on the Senate.
Though conservative House Democrats will have issues with the fee, once legislation is crafted, industry sources believe a proposal will get through the lower chamber. The Senate is another matter.
Centrist senators have repeatedly served as a bulwark for big banks in the aftermath of the financial crisis. The Senate defeated legislation that would have allowed judges to adjust the terms of mortgages, and didn’t take up a punitive bill that would have stripped AIG employees of their bonuses.
If Republican Scott Brown, who criticized the tax, wins Tuesday in Massachusetts’s Senate race, the financial industry’s confidence in defeating the new proposal will be bolstered. Some think Obama’s vilification of the industry has gone over the top, and that the public will see the fee as something that will just be passed on to consumers.
However, if the winner is Democrat Martha Coakley, who in the campaign’s final days blasted Brown over his position on the tax, the message may be that attacks on the banks worked. Then it could be difficult to stop the bank fee and other proposals targeting the financial world.
North Dakota’s strong economy
The political winds in North Dakota appear to be shifting against Democrats, despite a state economy that ranks among the nation’s strongest.
The state’s 4.1 percent unemployment rate in November (up from 3.1 percent when the recession started) was the nation’s lowest. The state also enjoys a budget surplus and a growing population, big news in a place that saw its population gradually decline for most of the 20th century.
Hoeven officially announced his run for the Senate the next week, and The Cook Political Report has the seat as a solid Republican pick-up.
Cook has Rep. Earl Pomeroy’s (D-N.D.) race rated as “likely Democratic,” but Pomeroy expressed worries last week about how the healthcare debate is affecting his reelection effort. His statewide district leans Republican by 10 percent, according to Cook.
Three candidates have lined up to take on Pomeroy. All hope that Hoeven will create coattails that could allow them to win in November.
Mark Jendrysik, a political science professor at the University of North Dakota, said Pomeroy is still “probably going to win” in 2010.
Pomeroy is serving his ninth term in the House and is generally well-liked in the state, Jendrysik said.
He also thinks Pomeroy can use the economy to his advantage. “I think the state’s economy is helpful for all candidates if they can take some plausible credit for it,” he said.
Republicans will try to paint Pomeroy as a vote for Speaker Nancy Pelosi (D-Calif.), an argument Democrats running in red districts across the country are used to.
On the economy, the argument will be that the policies of the national government, including healthcare reform, are a threat to the state’s economy.
Hoeven told ABC last week that the “biggest concern” for the state’s economy is the drag of the national economy.