When I initially read the title of this article in the NY Times, I thought, “finally, Wall Street is going to stand up to Obama’s wealth redistribution games.” Which was then followed closely by, “WTF? AYFKM? Carter G. Phillips of Sidley Austin? Barry and Mishy’s old law firm? What’s the game now, and I bet Davis Polk & Wardwell are not happy, or maybe they just don’t want to touch this one.”
Wall Street’s main lobbying arm has hired a top Supreme Court litigator to study a possible legal battle against a bank tax proposed by the Obama administration, on the theory that it would be unconstitutional, according to three industry officials briefed on the matter.
In an e-mail message sent last week to the heads of Wall Street legal departments, executives of the lobbying group, the Securities Industry and Financial Markets Association, wrote that a bank tax might be unconstitutional because it would unfairly single out and penalize big banks, according to these officials, who did not want to be identified to preserve relationships with the group’s members.
The message said the association had hired Carter G. Phillips of Sidley Austin, who has argued dozens of cases before the Supreme Court, to study whether a tax on one industry could be considered arbitrary and punitive, providing the basis for a constitutional challenge, they said.
For those that do not know the background of Sidley Austin and the Obama’s connection to this law firm, go here; it’s a long read but well worth it.
Let’s check out who is exempt from the “bank tax”. Wow – all the government owned entities. An ever expanding pie for the federal government.
There may be room for compromise. Administration officials hope to keep the proposed tax limited to major financial institutions with more than $50 billion in assets but consider that a difficult line to draw. For example, the proposed tax would not apply to large hedge funds; the mortgage finance giants Fannie Mae and Freddie Mac; or the carmakers Chrysler and General Motors.
“We believe the lines we have drawn are sound and sensible,” said Gene B. Sperling, a senior Treasury Department official. “We understand these are the type of things we will need to keep an open mind on in negotiations with Congress.”
The financial lobby has insisted that it is unfair for banks to cover the cost of losses tied to nonbank bailout recipients like the automakers and the American International Group, the giant insurer that is now majority-owned by the government. In an appearance on CNBC on Thursday, Representative Barney Frank, chairman of the House Financial Services Committee, called the argument over including the automakers legitimate.
At the lobbying group, the selection of Mr. Phillips of Sidley Austin raised eyebrows because it suggests that Wall Street may be spoiling for a fight. Davis Polk & Wardwell, another white-shoe law firm, has been advising the same lobbying group on legal matters tied to new financial regulation.