January 17, 2010
The First Casualty of Debate is Ignorance
Late last week, President Obama proposed (albeit in very broad strokes) a "Financial Crisis Responsibility Fee", to be levied upon financial firms of all types with more than $50 billion in consolidated assets. The fee would commence on June 30, 2010 and last for 10 years (in hopes of reimbursing the federal government for an estimated $117 billion shortfall from the TARP program of 2008). Apart from the obvious expected opposition from Wall Street, the tax has prompted debate over whether the proposal is old (in that it's been secretly in the works since last Summer) or new (in that it signals a newfound unity with Europe over such measures).
But perhaps the debate will succeed in helping to educate us all as to where stock market fees start and end.
For example, the notorious "Section 31 Fees" from the Securities Exchange Act - authorized by Congress, paid to the SEC by the stock exchanges, who pass on the penny-sized fees to member broker-dealers, who may, in turn, collect them from customers whenever they sell stock - consistently surprise all who learn of them. Cryptically referenced on order confirmations, and quite nominal in amount, the fees have undergone name changes and often invite disbelief. The SEC even has a dedicated explanation on its web site (http://www.sec.gov/answers/sec31.htm). That page emphasizes that the Commission routinely adjusts the percentage charged exchanges, that the monies offset costs of regulation, and that the exchanges are not forced to pass the charges onto customers.
Such discretionary recouping is likely to be discussed as the details on the Financial Crisis Responsibility Fee become available. The Treasury Department's facts sheet certainly does not preclude a financial firm from passing some part of its crisis responsibility fee onto its customers; commentators have opined that firms avoiding such a charge on their customers will enjoy a market advantage.
Whether implemented in its present form, attenuated, or outright loopholed, the fee should serve to make investors question more deeply the charges and costs attending each stock transaction. In that regard, the first casualty of present debates on the ultimate responsibility for the bailouts may safely be said to be ignorance (Well, at least we hope, as the Congressional Financial Crisis Oversight Commission marches toward its year-end deadline for a report of final findings...).
January 17, 2010 | Permalink