Failure to connect the dots......
The Obama administration is desperate for banks to start lending again. The only problem is that banks, because of their recent loan writeoffs, are challenged with having sufficient capital.
In particular, the FDIC, which oversees (and shuts down) banks, is requiring banks to increase their capital levels to 10% - 12%. (7-8 used to be the norm). Banks can increase their capital by selling stock to new shareholders, which many are trying to do.
Ah, but just as banks are going out trying to raise capital by selling stock, Obama announces that, in his new budget, the tax on dividends will be raised from 15% to as high at 35%.
While many might applaud the taxation of dividends as a "wealth tax", in fact, the prospect for a higher dividend tax makes buying bank stocks that much less attractive for investors.
And if the banks can't sell the stock, they can't raise their capital - which means lending won't free up anytime soon.
Unfortunately, Obama and his minions are not connecting the dots.
****************************************************************
Bayh's announcement -
Yesterday's news was filled with the retirement of Indiana Senator Evan Bayh. The two-term Democratic Senator, has more than $12 million in his campaign coffers and is leading in the polls. Speculation is rampant on why he departed.
Evan Bayh was the moderate leader of the Democratic Party. His departure, I believe, has consequences well beyond the loss of a single senate seat for the Democrats.
The Democratic party is built on a wide coalition of interests - from the far left liberals to the Reagan Democrats. When moderate Democrats became concerned about the left tilting leadership of Nancy Pelosi, there was always the calm beaming presence of Senator Bayh to remind moderate Democrats that they were represented by the party. But no longer.
Who is that moderate voice to keep Reagan Democrats in the fold. Who, in the Democratic caucus, offers confirmation that the party has not completely gone to the left?
With Bayh's departure and the looming 2010 election, the Democrats need to find that answer.......and fast.
In particular, the FDIC, which oversees (and shuts down) banks, is requiring banks to increase their capital levels to 10% - 12%. (7-8 used to be the norm). Banks can increase their capital by selling stock to new shareholders, which many are trying to do.
Ah, but just as banks are going out trying to raise capital by selling stock, Obama announces that, in his new budget, the tax on dividends will be raised from 15% to as high at 35%.
While many might applaud the taxation of dividends as a "wealth tax", in fact, the prospect for a higher dividend tax makes buying bank stocks that much less attractive for investors.
And if the banks can't sell the stock, they can't raise their capital - which means lending won't free up anytime soon.
Unfortunately, Obama and his minions are not connecting the dots.
****************************************************************
Bayh's announcement -
Yesterday's news was filled with the retirement of Indiana Senator Evan Bayh. The two-term Democratic Senator, has more than $12 million in his campaign coffers and is leading in the polls. Speculation is rampant on why he departed.
Evan Bayh was the moderate leader of the Democratic Party. His departure, I believe, has consequences well beyond the loss of a single senate seat for the Democrats.
The Democratic party is built on a wide coalition of interests - from the far left liberals to the Reagan Democrats. When moderate Democrats became concerned about the left tilting leadership of Nancy Pelosi, there was always the calm beaming presence of Senator Bayh to remind moderate Democrats that they were represented by the party. But no longer.
Who is that moderate voice to keep Reagan Democrats in the fold. Who, in the Democratic caucus, offers confirmation that the party has not completely gone to the left?
With Bayh's departure and the looming 2010 election, the Democrats need to find that answer.......and fast.
Obama and his advisors should carefully map out their plans. They should also consider the downsides to bank investments.
Reply to this