Wall Street & Blogger Quotes on 90% 'Bonus Tax'

Posted by urbandigs

Fri Mar 20th, 2009 03:10 PM

A: Wall street is reeling with talk about this new tax on bonuses over $250K for TARP recipients of $5Bln+; pay back the government to get below that, and the new tax wont apply. Thousands of employees could be affected. The Senate votes on the measure next week. I can think of both very real reasons and very psychological reasons why this law is causing such nervousness for many; yes, even those that are not on wall street but are trying to sell high end Manhattan properties. I discussed last month the high end nature of this Manhattan housing adjustment. It appears we have entered the 'regulatory' phase of this crisis - expect more. The new tax law, if passed, will be retroactive for 2008 tax year bonuses since it would apply to bonuses paid out by TARP recipients after Dec 31st, 2008. Bonuses are generally paid out during the first four months of the new calendar year, based on 2008's production. What happens to those that got their bonus, cashed that check, and spent the money already? Doh!

The fact that this law is going to Senate, is causing an immediate psychological reaction for both buyers and sellers of Manhattan real estate. As one would expect, sellers are more nervous than they already have been and buyers have one more reason to be cautious. I did not do this people, so don't blame me for any effect out there; as the media, I'm sure many will blame me for this. I'm just telling you what I sense.

The real impact comes later when we see how deeply this affects those who still have their job, but have big mortgages, expensive lifestyles and much lower net income. Think further along the economic chain how this may affect the local economy. Also consider how 'retention of talent' plays out with this new law. Seems like there will be a lot of good people (yes, there are some out there) heading to firms with no connection to TARP funds. Expect wall street to innovate ways around any tax code change to reward employees and retain talent.

Here are random thoughts from wall streeters (posted anonymously of course) versus bloggers on the expected new bonus tax.

RANDOM WALL STREET THOUGHTS ON BONUS TAX

  • “Feels like we are on the titanic. Some are oblivious, still dancing to the band that's still playing. Others fighting to get in boats. Many stunned, wandering the deck, not realizing what's going on. The bridge arguing over who's is at fault (that's congress right now). I am outraged at the street's performance, but we should be worried that the situation is spiraling out of control. Our leaders have no idea what they are doing, and the market and the country doesn’t fully know that yet.”


  • "Although the public is cheering at effective potential bonus caps of $250,000 that this tax imposes, the ramifications for the global economy are huge. There is a trickle down effect, it does start at the top, the tap will be shut and every sector of the economy will suffer."


  • "I'm shocked that a New York representative (Charles Rangel - D New York) doesn't understand the ramifications for his own city. I would have expected this from an out of stater."


  • "I don't know who gets credit for this, but it goes like this: "When a poor American walks by a rich American's house he says "Someday I'm gonna be that guy". When a poor Irishman walks by a rich Irishman's house he says "Someday I'm gonna get that guy". In the past, that was very true, and it's the reason I left Ireland. It's an incredibly counterproductive attitude. Now I think the US has switched to this way of thinking."


  • "Instead of trying to prevent the spoiled cookie from crumbling and piecing back together all the tiny crumbs back in an effort to preserve the rotten cookie, we need to just let the cookie crumble, gather all the crumbs and bake another new, much better and improved cookie.

    If we had let market and Darwinian forces work to begin with, these entities would have failed and we wouldn't be in this situation. As always, unintended consequences from market intervention always comes back to bite, and the bite is more damaging than the original problem.

    Class warfare is a dangerous seed."


  • "The markets are damn near impossible to trade right now - not only because of deflationary and recessionary fears, but because no one knows what the government will come out and say next, and deciding to tax 90% of TARP bonus money only adds to the overall uncertainty. It's well known that our elected representatives are more concerned with the appearance of reform than with actual recovery, but this legislation is so flippant and irrelevant that it's downright embarrassing. If they want to focus on fairness, focus on the AIG counter parties."



    • SOME BLOGGER THOUGHTS ON BONUS TAX

  • TYLER DURDEN (Zero hedge) - "getting some more color for public disclosure but everyone i speak to who is solidly in the money this year (trader wise) is saying "screw this" i will get nothing at all and thus nobody has any incentive to take on any more risk and people are just unwinding profitable positions and planning on a beer break until the end of the year as they realize they will all get screwed one way or another."


  • ROLFE WINKLER (OptionARMageddon) - "Imagine building a sand castle to hold back a tsunami. Policy-makers are right to be very fearful of the tsunami's destructive power, but it's just too large to be held at bay. Either we recognize there's no stopping it, and retreat to higher ground with whatever meager resources we can salvage, or we take our stand on the beach and drown."

    Your thoughts? Bloggers can reach me here to participate and publicize their thoughts.

    Add a comment

    62 comments

    • CAPTCHA Image