Congress readies 90% punitive taxes on bonuses

The Americans have begun moves to introduce probably the most socialist tax ever seen in their history. A 90% tax on bonuses for companies that have had a taxpayer bailout . The tax would apply to bonuses paid to high earning employees at companies that have received at least five billion dollars in aid from the US government. The measure comes after it was revealed that more than 160 million dollars were paid in bonuses to top AIG executives in the past week. The Democratic tax would apply to employees whose total annual pay exceeded 250,000 dollars at firms that received more than five billion dollars in government rescue funds.

So

Should it be done here in the UK?
Could it be done here?

Should Sir Fred get the 'Public opinion tax,' threatened in a moment of opportunistic populism by Harriet Harman a few weeks ago?
And if it were unveiled could a socialist government, desperate for funds, resist not putting that particular genie back inside the bottle.

Probably the only factor preventing what would be seen as a vote winning, anti Tory, anti capitalist, pro worker, debt reducing, equality, strong government policy, is that if it could be done for bankers, could it not apply to regulators? Or legislators? Or the guardians of the public finances? Or civil servants? Or Public sector workers? Or Quangos? Or Union Leaders?
Or MP's ....

Why only 90%

"We figured that the local and state government will take care of the other 10 percent," quipped Democratic Representative Charles Rangel, chairman of the tax-writing House Ways and Means Committee.

Gordon Brown saves Russell Brand and Johnathan Ross

The Prime Minister broke from his high level summit meeting in Paris with President Sarkozy to make this monumental pronouncement on the worrying situation currently being experienced in the United Kingdom.


"I have become a sort of political Ricky Gervais lately. Popping up on soft chat shows to give my opinion on anything and to promote myself and my book {"No time for change." Hodder and Stoughton £19.95}, and now holding press conferences about people that I have never heard of. It is difficult to exaggerate the severity and importance of these recent events. Not since the beginning of the First World War has our light entertainment budget been so close to collapse. A few weeks ago the jokes on Friday Night with Johnathan Ross and The Russell Brand show started to dry up. And then yesterday the BBC went into meltdown. "said Gordon Brown, The Prime Minister.

"A terrible serious of unfunny and puerile pranks, that started in America with the likes of Lenny Bruce and Howard Stern, and spread across the Atlantic to engulf UK DJ's such as Chris Moyles and Chris Evans led to an attack on an EU national, working in the food and hospitality industry,and has required this government to take firm action. The government drafted in its own spin doctors and joke writers and bought up 50 billion pounds worth of shares in Johnathen Ross and Russell Brand to ensure the survival of the genre. The BBC's flagship stars have been taken into temporary public ownership until the crisis passes."

He went on to say..
"Ross Kemp and chat show host Russell Harty have been earning very large salaries and getting big ratings bonuses but it has led to a culture of irresponsible risk taking that has now bought television to the very brink of the abyss. The light touch of the Furious Satire Authority [FSA] have allowed BBC Radio 2 comedy to become largely unregulated."

So, I announce today, that there is a need for more boring television and radio shows."said the PM. "The popular BBC 9pm -1am Friday night slot will now be taken up with repeats of Last of the Summer wine, My Family and Terry and June. Radio 2's 10am Saturday show will be replaced by an extended Moneybox and a Quote-Unquote special. I have also called for much tighter controls by the regulator SWCHOF on Nick Ross and Jo Brand or whatever their names are. I believe these measures will restore public confidence in the mind numbing dullness of the BBC's offerings."

The PM then grimaced for the cameras before returning to make his apologies to the President of Slovenia who's speech he had interrupted to make this statement

Johnathen King, the governor of television, believes it will be a "long, slow haul".The BBC's stars have been propped up and actions taken to stave off their collapse but for millions of households the next year will be far from comfortable. Repeats of Dad's Army, Simon Scharma's History of Railway Tunnels and endless repeats of the Antiques Roadshow. BBC Parliament MTV and that silly carboot program are the only fare as the BBC struggles to get back on an even keel.

Later the Prime Minister called on all other European Union members to follow his lead and adopt "The Magnificent Brown Plan" in their own countries. Meanwhile billions of pounds have been wiped off the value of Johnathen Ross and Russell Brand and the stars popularity still continues to fall every day.

Lehman's Bomb Disposed?

Here is a link to the latest news re the Lehman's CDS close today. Perhaps after all there is to be no explosion? I did see this as well today though.

If tomorrow, when the dollar amounts are announced by the various parties involved, reveal no major losses (a small Hedgie should not be too much to worry about if it comes to it!), then this is a great crisis passed.

CDS may yet come to haunt the world at a later date if other big institutions go down, but for the moment this might be another sign that the credit crisis is past its worst point. LIBOR is coming down, money markets are opening up...what was that phrase? 'The green shoots of recovery.'

Now only a serious recession to get through and years of paying back the debt from the bail-out. In my wildest imagination I wonder if the scale of the bail-out would still be needed if less heed was paid to CDS rates. Traders looking at these were one of the main causes of the huge share price falls.

However, now the socialists have their hands on the throat of capitalism, they are not about to let go...

$1 trillion bail-out; Badger cheers!

Robert Peston's reaction to the news that the US government is to bail out mortgage companies Fannie Mae and Freddie Mac by saying that our little problems with Northern Rock pale by comparison.

For all the detail and comment you could want on this story see Barry's blog here.

Sadly the NR comparison is not quite true. NR never had oblique Government guarantees, NR has a worse looking portfolio of loans than either of these two companies. The US estimate is that if 10% of mortgages for bad then the US taxpayer could be $100 billion in the hole. However, we have already 'invested' £3 billion in NR and if 10% of the £40 billion loans go bad then we are on the hook for £7 billion loss. Our economy is 10x smaller than the US and we also have a current exchange rate of $1.75 to the pound.

Therefore US losses estimated at $100 billion / 10 (economic capacity) x exchange rate 1.75 = £5.7 billion.

Northern Rock losses estimated at £7 billion.

Great performance by our Chancellor eh?

My two cents: the markets may rise but this bail out surely will cause foreign investors to think twice about the US. The Dollar rally may continue for a bit, but it seems that the US has decided to inflate its way out of the credit crunch for sure this time.