If you are interested in how the stock market feels about Obama's proposed tax on banks, it's down about 200 points at 2:00pm today.

Reva,

Not since the heydays of President Lyndon Baines Johnson has any political party had a 2/3rds majority in the U.S. Senate. Until Senator-elect Scott Brown (R-MA) is seated, the Democrats still have a 60% control in the Senate. 60% is not enough to override a Presidential veto but it is sufficient to stop a filibuster in the Senate.

If you owned bank stocks wouldn't you sell them now?

How Obama has rocked the streets today is in announcing proposed restrictions on bank operations. He is proposing no more bank involvement in hedge funds and other financial vehicles. Many are questioning if this move is not a few years premature. Obama gave full credit to economist Paul Volcker for the proposal.

Shannon..repaying the Tarp funds is payment for our helping the banks survive. The FED has been buying Treasuries and Mortgage Backed bonds to keep rates artificially low and stabilize the bad assets the banks still own enabling the banks to artificially increase risk free earnings. They are not making money from traditional banking activities, like lending. Why should you and I enable the banks to do all that without getting paid? In 15 or 20 years who do you think will be footing the bill for saving them again? In terms of them passing additional levies on to us, recent and future regulatory changes will have lessened their ability to do so.

I'm not a big fan of the banks for the Fed for that matter.

And I do think they should repay their TARP funds quickly. That being said we have always seen taxes land in the laps of the consumer. Additional regulations will make banks take a less obvious route to pass on the cost of the new tax, but nonetheless the consumer will pay the bill.

Remember Congresses helpful bill for credit card reform? The industry responded by jacking up rates across the country before the bill went into effect. I feel the tax on banks is an attempt to score points with the public for going after the boogey man, but it's real effect may do more harm than good.

Well said Lance. Banks managing Hedge Funds and such are ultimately playing with taxpayer dollars. Our system of fractional banking and bailouts by the FDIC only seem to encourage risky business practices to chase after big returns.

To a reasonable extent of their fair market equity, banks should be allowed to invest assets in any legal manner they see fit. Why not? I agree with Lance, however, that FDIC insurance premiums should be risk based.

What I deplore are speculative deriviatives. If something needed regulation and trimming back it is this worst of legally existing instruments. AIG is effectively gone because of them and it is with AIG that a portion of TARP is still at risk.

Last year we heard how speculative derivatives would be regulated and brought into control. Where are those laws and regulations? This is the hard work and everyone has seemed to put it to the back burner and turned off the heat.

Kevin,

Wikipedia got it right when they speak of futures contracts as the simplest form of drivatives. One of their original uses was to reduce risk in the farming transaction and that use goes back many, many decades if not centuries ago.

As you point out, it was the actions of the Clinton Administration that allowed the financial markets to create and trade speculative and risky derivatives that were little more than gambling on the outcome of future events. It is said that one investment house declared their disappointment that more product was not being created. One is said to have proclaimed that if a cow could have written one, they stood able and willing to sell it.

Eventually the situation became so bad and they were so speculative and poorly written that only the authors of the instrument were believed able to determine their market value. It is hard to believe that a society with so many financial safeguards allowed itself to become victim to these instruments to the extent we did.

Stock market is up about 25% over the last year. I’m not sure that’s any more of a reflection of the market’s view of Obama than a 200 point drop in one day is. rnrnThe market was most likely responding to the jobs numbers, as was previously mentioned.