Bankers react angrily to US bid to slap punitive taxes on bonuses
Sunday, 22 March 2009
From Fazle Rashid
NEW YORK, Mar 21: Bankers on both sides of the Atlantic have reacted angrily against American bid to slap punitive taxes on bonuses paid to executives at the financial institutions which have received huge cash infusion from government. AIG, the failed insurance giant, paid $165 million out of $170 billion it received from the bailout fund.
The government has imposed a 90 percent tax on bonuses paid to executives of the failed financial institutions. The tax measures will send the US back to stone age, a banker in Germany said. He was joined by a senior US banker who said " what good does it do to be demonising an industry that you need to revive to fix the economy". This is the most profoundly anti-American thing I have ever seen, the another enraged banker said.
Senior bankers warned that prohibitive tax could precipitate exodus of talents from some of the biggest names in US financial market. The measure could hasten many banks to cut lose of government embrace by paying public capital even if the price is more severe credit crunch. Citigroup CEO Vikram Pandit admitted that populist anger was warranted but added prohibitive tax will stall all the work done so far to stabilise the economy. We need talented people to set the financial sector on its right track, Pandit was quoted as saying by a reputed paper.
The Wall Street is bracing itself for a draconian clampdown on its pay culture. Many are saying the proposed legislation on punitive tax measure will undermine the rescue programme. Such legislation will be ultra vires of the constitution, many others are contending.
US authorities have no option but to prevent the disorderly failure of a large financial institution in current market condition, said Be BarnankeFed reserve chairman. The US deficit will balloon to 13 percent of the gross domestic product in 2009 if Obama's budget proposals were accepted by the Congress. Congressional Budget Office said the deficit in 2009 would expand to $1845 billion. The cumulative deficit from 2010 to 2019 could reach $9300 billion -- some $2300 billion more than the White House projection.
The Republicans are saying that President's budget will lead "our nation into a far worse financial catastrophe." Another said the budget would create an avalanche of debt that is poised to crush the economy.
European Union in its battle against the global economic downturn has pledged euro75 billion in new contributions to the International Monetary Fund and will work for stricter financial market regulation. The summit of the G20 nations is billed for April in London. Gordon Browne who has promoted significantly his political standings by being a strict pursuer of setting the economy back on trail allayed general fear saying: "The idea that China does not want a positive outcome from the G20 discussion is wrong". John McCain who lost the presidential race for the White House to Barack Obama refused to criticise the President. McCain said the country is going through a tough time and the President needs time to fix them. He said Tim Geithner, embattled US Treasury Secretary, should be given a chance to succeed. Secretary Geithener has taken more concrete actions to repair the financial system in his less than two months in office than others have taken in course of year, a senior Treasury official said.
NEW YORK, Mar 21: Bankers on both sides of the Atlantic have reacted angrily against American bid to slap punitive taxes on bonuses paid to executives at the financial institutions which have received huge cash infusion from government. AIG, the failed insurance giant, paid $165 million out of $170 billion it received from the bailout fund.
The government has imposed a 90 percent tax on bonuses paid to executives of the failed financial institutions. The tax measures will send the US back to stone age, a banker in Germany said. He was joined by a senior US banker who said " what good does it do to be demonising an industry that you need to revive to fix the economy". This is the most profoundly anti-American thing I have ever seen, the another enraged banker said.
Senior bankers warned that prohibitive tax could precipitate exodus of talents from some of the biggest names in US financial market. The measure could hasten many banks to cut lose of government embrace by paying public capital even if the price is more severe credit crunch. Citigroup CEO Vikram Pandit admitted that populist anger was warranted but added prohibitive tax will stall all the work done so far to stabilise the economy. We need talented people to set the financial sector on its right track, Pandit was quoted as saying by a reputed paper.
The Wall Street is bracing itself for a draconian clampdown on its pay culture. Many are saying the proposed legislation on punitive tax measure will undermine the rescue programme. Such legislation will be ultra vires of the constitution, many others are contending.
US authorities have no option but to prevent the disorderly failure of a large financial institution in current market condition, said Be BarnankeFed reserve chairman. The US deficit will balloon to 13 percent of the gross domestic product in 2009 if Obama's budget proposals were accepted by the Congress. Congressional Budget Office said the deficit in 2009 would expand to $1845 billion. The cumulative deficit from 2010 to 2019 could reach $9300 billion -- some $2300 billion more than the White House projection.
The Republicans are saying that President's budget will lead "our nation into a far worse financial catastrophe." Another said the budget would create an avalanche of debt that is poised to crush the economy.
European Union in its battle against the global economic downturn has pledged euro75 billion in new contributions to the International Monetary Fund and will work for stricter financial market regulation. The summit of the G20 nations is billed for April in London. Gordon Browne who has promoted significantly his political standings by being a strict pursuer of setting the economy back on trail allayed general fear saying: "The idea that China does not want a positive outcome from the G20 discussion is wrong". John McCain who lost the presidential race for the White House to Barack Obama refused to criticise the President. McCain said the country is going through a tough time and the President needs time to fix them. He said Tim Geithner, embattled US Treasury Secretary, should be given a chance to succeed. Secretary Geithener has taken more concrete actions to repair the financial system in his less than two months in office than others have taken in course of year, a senior Treasury official said.