A recent report from the London Telegraph has generated a lot of buzz and interest, as JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon evidently called British Finance Minister Alistair Darling earlier in the month to let him know he didn’t like the arbitrary 50 percent tax levied by Darling on banking bonuses.
Dimon let Darling know the tax would be an unfair penalty on the U.S.-based bank, and reminded Darling that JPMorgan didn’t receive any bailout funds from the UK government, employs a lot of Brits, and helped fund British banks during the economic crisis. It’s unknown at this time what Darling’s response was other than his lackeys reiterating the line that it’s a fair tax, whatever that means.
The Financial Times cited a UK Treasury spokesman who said this: “This is a fair measure. No bank would be left standing around the world without government intervention.”
What is disconcerting for Dimon and others is probably the arbitrariness of Darling’s decision. While he said it would be a one-time tax, that obviously can’t be trusted, and the response of Dimon and JPMorgan shows they don’t trust it to be true.
Obviously the commitment to build the European headquarters in London’s Canary Wharf district is being reconsidered, as once it would be constructed, JPMorgan would be subject to the anti-banking sentiment in Britain, which could result in arbitrary, or possibly permanent taxes being harshly applied to executives in the industry, undercutting the ability to compete with other countries. Dimon himself reportedly told Darling he perceives Britain as becoming anti-bank.
This has been brought up in the talks, as hints of either scaling back on the Canary Wharf project or outright abandoning it have been thrown around by officials from JPMorgan, who have said that the 50 percent tax is definitely “a factor in the decision.”
Dimon reportedly used the plans to build in the Canary Wharf area as the commitment JPMorgan has to the city, which would cost the banking giant about $2.4 billion. The bank has already paid out 237 million pounds to buy the land in the financial district.
The purpose of the project would be to bring together JPMorgan employees from seven different buildings to one.
Again, I don’t think the issue is the one-time nature of the tax, it’s that there is no guarantee that it indeed will be a one-time tax, and once the building is up, it would force JPMorgan to continue on in the area regardless of what people like Alistair Darling do to make it harder to compete around the world.
The tax itself would kick in when bonuses of bankers go above $39,750.
When a Treasury spokesman defended the tax as fair for the reasons it would be applied to all banks, it revealed the cluelessness government bureaucrats everywhere have concerning the issue. How hard is it to understand a bank employee could go to France, Germany or the U.S., among other countries, in response to the tax? Some already have.
Hopefully Dimon and JPMorgan will stick to their guns and make Darling pay for his ignorant decision. But whether he does or not, the exodus of workers from the UK will discipline and educate the socialists there who don’t understand competition and the market forces that are part of it.
