Banks Stocks Mixed on `TARP Tax` Talk, Buy Call
U.S. bank stocks were mixed in trading ahead of the market open on
Thursday, as talk of a proposed "TARP Tax" on the nation's biggest
banks competed with a brokerage report urging clients to buy the three largest
banks.
President Barack Obama will propose a special 10-year fee on large
financial companies to repay taxpayers for the "extraordinary"
assistance they got to keep the economy from collapsing in late 2008, a senior
administration official said Wednesday.
Obama is expected to announce his proposal Thursday morning.
The assessment on excess liabilities at big firms is designed to raise
about $90 billion over 10 years. It would remain in place for at least 10
years, or until all losses from the Troubled Asset Relief Program were repaid.
Analysts at FBR Capital Markets said it is unlikely such legislation
will pass the Senate, although it is likely to pass in the House.
"The proposal has a higher probability of passage in the more
populist-driven House, which may result in some negative headline risk for
large financial institutions when the issue is tabled," the analysts told
clients early Thursday.
Nonetheless, investors appeared cautious after the news, and, combined
with the drubbing some industry executives took in front of a government
commission on Wednesday it's not surprising sentiment was mixed.
As the White House and Congress consider a host of new regulations for
Wall Street, a commission studying the financial crisis harshly criticized the
heads of the nation's biggest banks Wednesday for their role in the near
collapse of the economy in 2008.
Panel members asked questions about bank-executive bonuses they saw as
excessive; a lack of provisions to "claw back" bank-employee pay when
things are bad; and a need for investment banks to have "skin in the
game" by retaining an interest in packaged securities they sell to
investors.
Among the country's biggest banks, Goldman Sachs (GS), Morgan Stanley
(MS) and Wells Fargo (WFC) all fell in pre-open trade.
On the upside, J.P. Morgan Chase (JPM) and Citigroup (C) rose in
pre-open activity.
Ladenburg Thalmann on Thursday started coverage of Bank of America, JP
Morgan and Wells Fargo all with a buy.
The firm called them "bionic" banks, and said they are
equipped to go on the offensive with growth investments, dividend increases and
share buybacks after their TARP-related capital raises.
"In our opinion, BAC, JPM and WFC will be the end-game
winners" of the financial crisis, emerging as "better companies than
they were two years ago, with more sustainable and attractive growth and return
levels."
Source: wsj.com