Bonus Tax Stocks Get Whacked

Yesterday our brilliant House of Representatives rushed through another bill that was created because they failed to notice something in a prior bill that was rushed through.  Note to House: Read what you try to write into law please. 

Yes, AIG was bailed out and would never have been able to pay the bonuses had the government not bailed them out.  Congress has a case to want the bonuses back.  But for them to tax bonuses 90% going forward only puts these companies at a huge disadvantage, which will make it much harder for the taxpayers to get their money back.  Companies like JP Morgan, who would fall under the 90% bonus tax, were pretty much forced to take money from the government, and for the government to now put them at a competitive disadvantage to non-bailout firms is astounding.  Jamie Dimon must be furious. 

Below we highlight the performance over the last two days of the 20 largest non-bailout global financial firms along with firms that would fall under this 90% bonus rule.  We excluded AIG, FNM, and FRE since they're essentially already gone.  As shown, the non-bailout firms are down an average of 1.38%, while the 90% bonus tax firms are down an average of 14.02% (including AIG, FNM, and FRE would make this figure even worse).  While the companies that would fall under this bonus tax rule are heading lower, their competitors are probably licking their chops for the top talent to come their way.  And the government still hopes to get the taxpayers their money back.  Good luck with that. 

 

Comments

[Sia]

Were companies really 'forced' to take government money? Well probably yes, but are they forced to keep it? NOOOOO! So if they don't really want it, give it back. No more complaints please. I think the money is just too good of a deal to give back, so most banks will keep it and complain about the restrictions. TOO BAD.

[Mr. Fed up]

This concept that America is hostage to continuing to pay bonuses to the scumbags who sold, marketed, and pushed these toxic assets is ridiculous. So far, the morons at the head of these businesses who absolutely proved that they are incapable of managing a safe level of calculated risk of assets, have been given an advantage over the companies that were better at managing their business, and thus didn't need a government bailout. If doing the right thing means that we lose some of the government bailout money, I think I speak for the American people in that we are ready to accept that. This mantra of "good people have to deal with the devil to recover from the mess created from greed and ignorance" is sickening.

[Bobo]

I like bespoke's research a lot, but the cause-effect implication of the table is just way way off - how much did the U.S. financial stocks run up prior to Thursday - gigantic amounts! (hint, just take a look at the table in the story right above this one) - so they were due for a pullback - yes, it looks like it was *caused* by the ridiculousness out of Washington, and its possible it was, but I think its still a bastardization of the theory that one caused the other

p.s. - that was not a comment on Washington's actions, just an unbiased look at the stock price action
- as for what's coming out of Congress... truly devastating - they better get their act together and realize just what consequences their actions have

[aa]

So-called top talents are merely suckers. Let them leave the US if they can really find a job elsewhere.