Displaying items by tag: biden
Biden Busting PE like Teddy Roosevelt
The U.S. has an extended history of periods of financial regulation, specifically trust-busting. That period has been in hibernation though for the last 50 years, that is, until now. Many judges in the United States may be getting a slue of cases related to similar topics with mergers and competition as Private Equity has extended its ownership to unprecedented levels. There is more alignment than ever within the administration on the future of competition and private equity when it comes to policy. They are pursuing new readings and interpretations of longer-standing precedents that will be more stringent on PE. This new strain of regulation has long-standing Democratic Economists like Larry Summers voicing concern, calling the new policies ‘populist antitrust’.
Finsum: There have been a large number of papers on the effect of co-ownership and competition that private equity companies are imposing, and that could be reaching its peak.
What Biden’s Bill Means for U.S. Economy
While a far cry from the size and scope Dems were originally hoping for Biden’s multi-agenda bill will hit his desk after passing the house, but what does this mean for the market and the U.S. economy? The bill is $430 billion dollars and will change taxes, healthcare, and climate policy. The plan hopes to slash carbon emissions by 40% within the decade spending a hefty $369 billion. However, it plans to generate $737 billion through tax changes and will have a net impact of $300 billion in deficit reduction according to the CBO. For the market, the stock buyback provision will be critical, but congress says it will generate $74 billion on its own. Still, this has been a key avenue for corporate spending in the last decade and Wallstreet will claim it forces inefficient maneuvers by corporations. The inflation reduction act will only make a very small impact on inflation over the next decade according to experts.
Finsum: Equity buyback taxes are very dumb, distorting how companies effectively spend money with excess revenue will only hurt the economy and the companies.
Biden Tax Destroys Buy-Backs
Dems are including a 1% tax on share buybacks in Biden’s climate and tax bill which is being pitched as an inflation bill. The tax was included to get Arizona Senator Krysten Sinema on board with the legislation. Most analysts say this will raise tensions with Wallstreet as investors will be apprehensive about the impact immediately and what it opens the door to moving forward. Many companies have recently engaged in massive buybacks using the excess profits to reinvest in their own companies. Experts say this could generate a lot of revenue, more than the carried interest which is expected to bring in $14 billion.
Finsum: Buy back boogeyman at it again. This legislation stops companies from doing the most responsible thing they can with excess cash.
Biden’s Going After Rich Clients with a Wealth Tax
President Biden’s 2023 federal budget levy’s a new ultra-wealthy tax that would apply 20% total income tax on those with a net worth of more than $100 million. Notably in the deal, it opens the window to tax unrealized capital gains or any asset growth. The bill is expected to meet a brick wall in congress however as even moderate Dems will have a difficult time supporting it. Biden’s selling point is the expected $360 billion in payments toward the deficit in the next decade. However, the senate proposed a very similar bill last year that was shut down by congress.
Finsum: Taxing unrealized gains is a slippery slope, and hopefully would never trickle down to different wealth classes.
Biden’s New Regulatory Pick
President Biden announced he is going to nominate Michael Barr, former Assistant Secretary of the Treasury and current dean of the University of Michigan's Public Policy School, for the Feds Vice Chairman of Supervision. Previously nominated Sarah Bloom Raskin pulled her nomination with harsh criticism from Republicans because she argued the Fed should discourage lending to traditional energy companies. Barr will be stepping into a difficult role but has experience in Government. He helped create the Consumer Financial Protection Bureau. Critics have said that Barr had been easy on bank regulations during the Obama admin and others were suspicious as to his role with Lending Club and Ripple Labs.
Finsum: This is a relatively new position but it has critical regulatory power for the financial system.