Inside the great investment houses on Wall Street, business has taken a surprising turn — downward.
Even after taxpayer bailouts restored bankers’ profits and pay, the great Wall Street money machine is decelerating. Big financial institutions, including commercial banks, are still making a lot of money. But given unease in the financial markets and the economy, brokerages and investment banks are not making nearly as much as their executives, employees and investors had hoped.
After an unusually sharp slowdown in trading this summer, analysts are rethinking their profit forecasts for 2010.
The activities at the heart of what Wall Street does — selling and trading stocks and bonds, and advising on mergers — are running at levels well below where they were at this point last year, said Meredith Whitney, a bank analyst who was among the first to warn of the subprime mortgage disaster and its impact on big banks.
Worldwide, the number of stock offerings is down 15 percent from this time last year, while bond issuance is off 25 percent, according to Capital IQ, a research firm. Based on these trends, Ms. Whitney predicts that annual revenue from Wall Street’s main businesses will drop 25 percent, to around $42 billion in 2010, from $56 billion last year.
~~~The downward slide on Wall Street parallels a similar shift in the broader economy, which has slowed considerably since showing signs of a nascent recovery this spring. And if banks come under pressure, all but the safest borrowers may struggle to get loans.
~~~Banks are also scaling back on making bets with their own money — known as proprietary trading — another huge profit source in recent years that will soon be forbidden under terms of the financial reform legislation passed by Congress this summer.
~~~Ms. Whitney says the gloomy short-term predictions foreshadow a series of lean years in the broader financial services industry.
Indeed, she said the Street faced a “resizing” not seen since the cutbacks that followed the bursting of the dot-com bubble a decade ago.
“We expect compensation to be down dramatically this year,” she wrote in a recent report. She predicts the American banking industry will lay off 40,000 to 80,000 employees, or as many as 1 in 10 of its workers.
Ok, not surprising. After signing a bill meant to scapegoat Wall Street earlier this summer how in the world could Obama and pals be surprised at this result? Especially when the real culprit of the economic collapse was the housing bubble brought on by CRA and the Democrats. Oh, there were many other reasons for it but if you’re asking for the major catalyst….the CRA.
So couple the collapse of the housing market and our economy with Obama’s anti-business attitude and we get this; A recession that hasn’t been seen before in a long time. 40-80,000 employee’s at Wall Street who will be in the unemployment line. Fewer loans will be made by banks, less growth, no jobs…..less expansion if any.
And what do we have to look forward to?
Obama increasing taxes!
What a leader.
See author page
If you look at this chart and understand it, you see that private consumers stopped borrowing pretty much the moment Obama got elected. (Not when he came into office.)
But then he created a new home buyer tax credit, and you can see the borrowing by this group bumps up (but to nowhere near traditional levels) for the three quarters of that ”stimulus” plan.
Now private citizen borrowing is back to near nil.
But lending is still taking place at very high rates.
The federal government is doing it.
The banking system is leery of risk, so, who knows, this might end suddenly, too, if the feds renig on debt in any way.
More on the chart here.
This trend is seen not only on Wall Street . . . but at the lowest level, grass-roots of borrowing. I am located in an area that is principally agricultural and in the past common practice was for a farmer to borrow the needed capital to plant a crop, fertilze, herbicide, and harvest. This is just not happening in my area any more. Some farmland that has been in production in the past is no setting idle. Some of my friends are now “diversified” more than ever before. What diversification has created a more year round income. Thus, the income from the sale of winter wheat (harvested in the spring) now is providing the capital needed to plant the summer crop of soybean. The risk is greater when the farmer relies on his own resources, a crop failure can have devastating impact, when the winter wheat fails (due to warm spell followed by the freeze) the money needed for the soybean is not provided. The increased caution at the bank makes it more difficult, if not impossible, for the farmer to get the funds needed and bingo, he’s bankrupt.
The entrepeneur and prospective new business owner has no available resource. The risk factors are just to high for the BANK to be willing to provide any funds at all. “Green Technologies” which are so much hype by the federal government have proven themselves to be gargantuan losers and bankers just absolutely refuse to be involved for the small business. Obtaining any form of government loan has become a virtual impossiblity, as the process is so cumbersome, with endless red tape and qualification evaluations that anyone in their right mind would never look at as viable.
We are in serious trouble and the feces have not hit the fan yet.
For a guy that spent his ‘working years’ shaking down banks in the Chicago area, I guess this is the best we can expect. The guy’s a grifter.
Maybe it’s time for a reality check.
Obama hasn’t raised taxes.
As a percentage of income, across the entire range of income levels, federal taxes are at their lowest levels since 1955.
Federal taxes as a percentage of total income have declined most dramatically for the wealthy.
http://moneywatch.bnet.com/investing/blog/make-money/your-federal-income-taxes-are-lower-than-you-think/109/
If you add to this the fact that the wealthiest among us presently own the largest share of the total wealth of the nation that they’ve ever had, you might begin to wonder what all of the tax complaints are about.
@Greg:
Dog squeeze.
The cigarette tax is just one example of increased taxation under Obie.
Reality check indeed.
@Greg:
Another reality check:
Democrats Have Increased Taxes by $670 Billion and Counting…
Once again Greg, I’ll invite you to answer the series of questions you conveniently ignored before:
It gets worse.
Obama has been raising taxes by ”closing loopholes” on the rich.
Every one of these Fiscal Year 2011 Revenue Proposals raise somebody’s taxes.
I hate to put a huge PDF link here, but it is our own US Treasury.
Reform Treatment of Financial Institutions and Products ………………………………………………………………………….. 29
Impose a Financial Crisis Responsibility Fee …………………………………………………………………………………….. 29
Require Accrual of Income on Forward Sale of Corporate Stock ………………………………………………………….. 31
Require Ordinary Treatment of Income from Day-to-Day Dealer Activities for Certain Dealers in Commodities, Derivatives and Other Securities …………………………………………………………………………… 32
Modify Definition of “Control” for Purposes of Section 249 ……………………………………………………………….. 33
Reinstate Superfund Taxes …………………………………………………………………………………………………………………… 34
Reinstate Superfund Excise Taxes …………………………………………………………………………………………………….. 34
Reinstate Superfund Environmental Income Tax ………………………………………………………………………………… 35
Make Unemployment Insurance Surtax Permanent …………………………………………………………………………………. 36
Repeal LIFO Method of Accounting for Inventories ………………………………………………………………………………… 37
Repeal Gain Limitation for Dividends Received in Reorganization Exchanges …………………………………………… 38
Reform the U.S. International Tax System ………………………………………………………………………………………………. 39
Defer Deduction of Interest Expense Related to Deferred Income ………………………………………………………… 39
Foreign Tax Credit Reform: Determine the Foreign Tax Credit on a Pooling Basis ……………………………….. 41
Foreign Tax Credit Reform: Prevent Splitting of Foreign Income and Foreign Taxes …………………………….. 42
Tax Currently Excess Returns Associated with Transfers of Intangibles Offshore …………………………………… 43
Limit Shifting of Income Through Intangible Property Transfers ………………………………………………………….. 44
Disallow the Deduction for Excess Nontaxed Reinsurance Premiums Paid to Affiliates ………………………….. 45
Limit Earnings Stripping by Expatriated Entities ……………………………………………………………………………….. 46
Repeal 80/20 Company Rules ………………………………………………………………………………………………………….. 47
Prevent the Avoidance of Dividend Withholding Taxes ……………………………………………………………………….. 48
Modify the Tax Rules for Dual Capacity Taxpayers ……………………………………………………………………………. 49
Combat Under-Reporting of Income on Accounts and Entities in Offshore Jurisdictions ………………………………. 51
Require Increased Reporting on Certain Foreign Accounts …………………………………………………………………. 51
Require Increased Reporting with Respect to Certain Recipients of FDAP Income or Gross Proceeds ……… 54
Repeal Certain Foreign Exceptions to Registered Bond Requirements ………………………………………………….. 56
Require Disclosure of Foreign Financial Assets to Be Filed with Tax Return ………………………………………… 58
Impose Penalties for Underpayments Attributable to Undisclosed Foreign Financial Assets ……………………. 60
Extend Statute of Limitations for Significant Omission of Income Attributable to Foreign Financial Assets . 61
Require Reporting of Certain Transfers of Assets to or from Foreign Financial Accounts ……………………….. 62
Require Third-Party Information Reporting Regarding the Transfer of Assets to or from Foreign Financial Accounts and the Establishment of Foreign Financial Accounts ……………………………………… 63
Permit the Secretary to Require Electronic Filing by Financial Institutions of Certain Withholding Tax Returns ………………………………………………………………………………………………………………………………….. 65
Establish Presumption of U.S. Beneficiary in Case of Transfers to Foreign Trusts by a U.S. Person ………… 66
Treat Certain Uncompensated Uses of Foreign Trust Property as a Distribution to U.S. Grantor or Beneficiary …………………………………………………………………………………………………………………………….. 67
Improve Foreign Trust Reporting Penalty …………………………………………………………………………………………. 68
Reform Treatment of Insurance Companies and Products………………………………………………………………………….. 69
Modify Rules that Apply to Sales of Life Insurance Contracts ………………………………………………………………. 69
Modify Dividends-Received Deduction for Life Insurance Company Separate Accounts ………………………….. 70
Expand Pro Rata Interest Expense Disallowance for Corporate-Owned Life Insurance (COLI) ………………. 72
Permit Partial Annuitization of a Nonqualified Annuity Contract …………………………………………………………. 74
ELIMINATE FOSSIL FUEL TAX PREFERENCES ……………………………………………………………………………….. 75
Eliminate Oil and Gas Company Preferences …………………………………………………………………………………………… 75
Repeal Enhanced Oil Recovery Credit ………………………………………………………………………………………………. 75
Repeal Credit for Oil and Gas Produced from Marginal Wells …………………………………………………………….. 76
Repeal Expensing of Intangible Drilling Costs …………………………………………………………………………………… 77
Repeal Deduction for Tertiary Injectants …………………………………………………………………………………………… 79
Repeal Exemption to Passive Loss Limitation for Working Interests in Oil and Gas Properties ……………….. 80
Repeal Percentage Depletion for Oil and Natural Gas Wells ……………………………………………………………….. 81
Repeal Domestic Manufacturing Deduction for Oil and Gas Production ………………………………………………. 83
Increase Geological and Geophysical Amortization Period for Independent Producers to Seven Years …….. 84
Eliminate Coal Preferences …………………………………………………………………………………………………………………… 85
Repeal Expensing of Exploration and Development Costs …………………………………………………………………… 85
Repeal Percentage Depletion for Hard Mineral Fossil Fuels……………………………………………………………….. 87
Repeal Capital Gains Treatment of Certain Royalties …………………………………………………………………………. 89
Repeal Domestic Manufacturing Deduction for Coal and Other Hard Mineral Fossil Fuels ……………………. 90
Reinstate the 39.6-Percent Rate ………………………………………………………………………………………………………….. 127
Reinstate the 36-Percent Rate for Taxpayers with Income Over $250,000 (Married) and $200,000 (Single) … 128
Reinstate the Limitation on Itemized Deductions for Taxpayers with Income Over $250,000 (Married) and $200,000 (Single)………………………………………………………………………………………………………………………. 129
Reinstate the Personal Exemption Phaseout (PEP) for Taxpayers with Income Over $250,000 (Married) And $200,000 (Single)………………………………………………………………………………………………………………………. 130
Impose a 20-Percent Rate on Capital Gains and Dividends for Taxpayers with Income Over $250,000 (Married) and $200,000 (Single) ………………………………………………………………………………………………….. 131
Limit the Tax Rate at Which Itemized Deductions Reduce Tax Liability to 28 Percent……………………………….. 132
The big stick:
Make Repeated Willful Failure to File a Tax Return a Felony ……………………………………………………………. 115
Facilitate Tax Compliance with Local Jurisdictions ………………………………………………………………………….. 116
Extend Statute of Limitations where State Adjustment Affects Federal Tax Liability ……………………………… 117
@Ayechihuahua, #6:
The choice seems to be between progressive redistribution by rational and moderate mechanisms, or ongoing regressive redistribution by default, until the process reaches a natural end point. I don’t believe the end point we’d get to by simply letting nature take its course would represent the sort of America the Founding Fathers originally had in mind. In 21st Century America, power follows money; concentration of wealth is the concentration of power; a total concentration of wealth into the hands of a tiny minority would be a form of tyranny.
We’ve recognized the threats posed by economic tyranny before. The government has intervened before to prevent the commerce of the nation, and ordinary citizens, from being dominated by powerful monopolies, for example. I suppose we could argue the constitutionality of that, too.
We live in a world where the collective economy is pretty much the only game in town. These aren’t like the days of the Founding Fathers, when one had the option of striking off West to build a new life away from dominating economic powers. We’re mostly all passengers on one ship now, like it or not.
I realize this won’t be viewed as an adequate answer. I haven’t actually been ignoring the questions, however.
From Greg:
So says the liberal who believes in taking your property and distributing it amongst others who may not have as much. How’s it working out for us Greg? Not very well, judging by the economy and the dissatisfaction amongst the population in general. Maybe your ideas, and those of your liberal friends, aren’t the best ones out there? Of course, we conservatives have known this for a long while, watching economies in socialist countries crash around the world.
No, you’ve just been willfully ignoring decades of economic information showing your brand of politics does nothing for a country’s economy, yet continue to play the same tune, over and over and over.
Stupidity is looking at the results of decades of history, yet choosing to continue along that same path, inevitably towards the same conclusion.
If you think that I just called you stupid, you may be right.
Greg;
Just a simple question . . . are you a veteran of US military service?
Newsflash!
@ Greg, there is nothing rational or moderate about the redistribution of my hard earned income for programs that I never asked for, do not support and the Nation cannot afford. The Current Regime is neither rational or moderate in spending. The spending is clearly Not Sustainable.
You are just another Economic Illiterate in my book and I most likely pay more in taxes than you make in a year. I pay quarterly and view it the same as pouring gold dust down a gopher hole.
Redistribution of Wealth creates no Private Sector jobs. It just destroys the Economy and creates a Welfare State.
I run my Own Business and did not acquire the Operating Capital or Land by taking it from others or panhandling on a street corner.
@Tallgrass, #10: Yep. Army. I spent 1970 in Vietnam.
@ Greg, May I add this little nugget to your talking points?
In my neck of the woods, Charity is Voluntary, Not Mandatory. 😉
@Old Trooper 2, #12:
I agree with you, in principle. But nobody ever seems to address the issue of what happens to America when wealth finally becomes so concentrated at the top that a tiny minority owns almost everything, and is so empowered by their wealth that they essentially make the rules.
The reason it’s an issue is because that’s the ungoing trend.
“Concentrated at the top”… Oh you mean like communism? Who do you think has all the wealth and goodies in North Korea? How about Venezuela? Cuba?
Yeah…a march toward socialism is *much* better, as history proves. sigh…
Greg;
Thanks for your military service.
The country deals with “problems” as they arise . . . “Obviously, to-big to fail” demonstrates that . . . even though that in and of its self has proven to be a failure.
@Greg:
I looked through it twice and found no references to Articles of the Constitution or citations from the Bill of Rights.
You want to take the position that the confiscation and redistribution of wealth is perfectly fine and acceptable yet you cannot, even after multiple requests, cite a Article or Enumerated Power or Amendment which creates a basis for the powers you are willing to hand over.
Strangely enough, I didn’t expect much more than that from you.
@Aye Chihuahua, #17:
I concede that to be true. But I’ve yet to see anything addressing the issue mentioned yet again up in post #15. Though I don’t know how the issue fits neatly into a constitutional framework, it still remains an issue. A central issue, in my opinion. I’m not sure that freedom and plutocracy will prove to be compatible.
Oh we have even more, fearless founding FA leader… we are still awaiting the regulations being written in the backroom on Barney Frank’s financial “reform” too. More ugly surprises to surface.
My guess is the details on that won’t come until after midterms… deliberately.
@ Greg, do you want me to cite Margaret Thatcher’s comment about what happens when You run out of “Other People’s Money” ?
There is a excellent article in Forbes mag. Sept. 27th 2010. How he thinks, nails Obama’s id. Dinesh D’Souza article on Obama is very telling and analyzes the ones thought process formed in his early years.
From the last paragraph ” But instead of reading us for the challenge, our president in trapped in his father’s time machine. Incredibility, the US is being ruled according to the dreams of a Luo tribesmen of the 1950s”.