Congress is being pulled in opposite directions by rising concerns about budget deficits and continuing pressures to prop up a fragile economy. This means it probably enact the higher tax rate on incentive fees of fund managers proposed in The American Jobs and Closing Tax Loopholes Act of 2010, writes Robert Pozen
Tag Archives: Financial Times
How to keep politics out of rating agency reform [FT]
By requiring a neutral third party to select the rating agency, Congress would significantly improve the quality of bond ratings relied on by small institutions and individual investors. Yet this approach avoids excessive political influence on the ratings process by limiting the government’s role to the minimum necessary to avoid ratings shopping.
A better fail-safe than CoCo bonds [FT]
CoCo with its mandatory conversion presents the unappetising combination of bond returns with equity-type risk. Sub-debt with an option to convert offers bond risks with the potential for equity-type returns. Which one would you choose?
How to design a fair bank tax [Financial Times]
It is unfair to impose a bank tax on all financial institutions with over $50bn in assets regardless of whether they received any direct federal assistance during the financial crisis. Congress should raise roughly the same amount by imposing the tax only on the very large financial institutions that received direct federal assistance and it should base the size of the tax on the amount of that assistance.
America’s budget deficit needs bipartisan action [FT]
Although a bipartisan agreement will be hard to achieve in the current Washington environment, both parties should recognise that a package of entitlement reforms is less dangerous than an explosion of US interest rates in the coming years.
Financial crisis served up with relish [Financial Times]
By John Plender. After two and a half years of relentless financial pounding, the crisis literature is becoming mountainous. To command the weary reviewer’s attention, any new book on the aberrations of the financial community has to have a clear focus and make a compelling case. In Too Big To Save? Robert Pozen, chairman of mutual fund group MFS Investment Management and a former vice-chairman of Fidelity Investments, pulls off the trick.
Lessons for the American housing market [Financial Times]
American subsidies are justified as necessary to promote home ownership in the US. Indeed, the rate of home ownership in the US rose to 68 per cent by 2006. Yet, without these governmental subsidies, the rate of home ownership in Canada also rose to 68 per cent in 2006. This comparison suggests that the large American subsidies for home purchases have led to higher home prices in the US rather than significant increases in the rate of US home ownership.
A mistake that will make banks riskier [Financial Times]
If Glass-Steagall were reinstated, we would be recreating the short-term funding weakness that forced Bear Stearns and Lehman Brothers into insolvency.