So as you know, the Obama administration has imposed a $90B tax on the nations largest banks because they caused this economic melt-down. Most people figured that these measures would hurt a little, but the firms would be just fine. Obama was going to get his money, his votes, and people were going to sing his praises for taking punitive actions against the banks. But just when you thought he was done and he was going to get what he wanted, he goes and screws it up!
It was announced today that he would be recommending that no bank should be able to:
1. Invest in a hedge fund/private equity fund
2. Run a prop trading desk*
* A prop trading desk is a desk that trades with the firm’s own capital, and not for customers.
My first thought…well I won’t write my first thought, but after reflection, my next thought was that the banks are screwed if this passes. Obama couldn’t take away the biggest money maker for a lot of the investment banks, could he? He does want the banks to be able to pay this tax back, doesn’t he? Can Congress really pass a bill like this? Say it with me everyone, “YES WE CAN!”
Goldman Sachs makes about 90% of its profits from proprietary positions, so if this was to go away completely, they are fucked. I don’t curse a lot on this blog, but “they be fucked” if this happens. The only solution that I can see to this problem is to spin off the investment banking arm of large banks to separate commercial and investment banking again. If this is Obama’s end game, why wouldn’t he just re-institute Glass-Steagall? (a law that said a commercial bank cannot own an investment bank)
I can’t talk about this anymore because if you think about it for too long, your head explodes, so be careful!
Read the full article: Fill it up again!