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Wall Street Whispers - The Tax Debate

At issue now is Wall Street's ability to keep the money it makes after the tax man is through.

NEW YORK (

TheStreet

) --

Editor's Note: This is a new column at TheStreet, called "Wall Street Whispers." It will take a look at what various media -- news sites, blogs, notes from analysts and investment firms -- are buzzing about, and run down the latest chatter we're hearing about Wall Street.

Tax Me Gently

It's been clear for quite awhile that reform measures will

limit Wall Street's ability to make money. But now another issue has come to the fore: Wall Street's ability to keep the money it makes after the tax man is through.

Banks have already been hit by the U.K. bonus tax, which is

reportedly sapping $2 billion

from the U.S. alone. But now

murmurs are increasing

about a potential "transaction tax" that

has support in Europe

and

left-leaning U.S. policy makers

.

Then there's the

TARP tax

to make banks pay for the non-bank bailouts that remain unpaid. And of course we can't forget the generic "bank tax" that will charge banks for ... well ... being banks.

That tax has support from the

Obama administration

, as well as its

counterparts abroad

. It's the quintessential knee-jerk response of politicians trying desperately to appease a populace upset about its finances who wants someone to blame.

Besides the institutions, there are also the wealthy people who work at banks and do business with them. They're slated to get hit by the expiration of Bush-era tax cuts that President Obama

plans to let expire next year

, as well as (presumably) the transaction tax, if it comes to pass.

The tax debate is sticky for several reasons, the giant, looming deficit among them. There's also the fact that people don't necessarily have to be wealthy to really, really,

really

hate being taxed. A lot of

people (read: voters)

simply don't like the idea of the government meddling in private finances.

But they also

don't like being unemployed.

In order to fix that, the government has to spend, and in order to spend it has to get that money from somewhere.

It's yet to be seen how far the Obama administration will go in financial reform measures -- the tone of the most heated debate, on derivatives, seems to change by the hour -- but two things appear to be certain. The "unchecked excesses" of Wall Street are about to get checked, and anyone who makes it out alive will simply get taxed to death. For bank-stock investors, it's a question of whether the economic recovery at home, and the fast-paced growth in emerging markets, are strong enough to outweigh those concerns.

Bulls of the Bourgeoisie

I was standing in a

Bank of America

(BAC) - Get Report

ATM vestibule over the weekend and noticed an advertisement that I can only really describe with one word: Lame.

It was a stand-up cardboard cutout of a man looking very perplexed about his returns, holding a sign that said as much. Of course, it offered up Merrill Lynch's advisory services as an option to solve his befuddlement.

It's not that Bank of America is wrong in appealing to the masses. In fact, this is something it has done very well from the start -- and maybe this is the right way to go. BofA is sending the message that Merrill is still around, and the acquisition has made the combined entity better at managing wealth. But the ad -- most likely part of BofA-Merrill's recently launched "help2retire" campaign -- was depressing for another reason: It was the living representation of Wall Street's

emasculated bull.

The troubled-looking almost-retiree seemed like a replica of the many other ads one sees on subways and magazine pages and billboards. They nudge you to "Talk to Chuck!" or "Turn here" (to Fidelity) -- a place you can trust, that won't steer you wrong, and doesn't associate with those unsavory Wall Street types. The collective mental response is "Uh, yeah, thanks -- I TRIED THAT.

TST Recommends

What have I got to show for it?"

There's no surprise here; Bank of America is good at what it does best: Being the

McDonald's

(MCD) - Get Report

of banking, serving every corner and every other house by appealing to the masses. It's also moving into the online brokerage business with "Merrill Edge," aiming to go head-to-head against Schwab, Fidelity, E-Trade, et al.

Bank of America seems to be

targeting upper-middle-class Americans who aren't in the poor house, but are worried about their future. Or they're playing catch-up with peers who did a little better by knowing better. If anything, those customers might be intrigued by the idea of Merrill's "thundering herd" and being one of the alpha bulls who make money in good times and in bad.

Then again,

Goldman Sachs

(GS) - Get Report

doesn't do much advertising at all -- its reputation is simply known. The tide of public opinion has turned against Goldman and the firm's stock price has been assaulted as a result. But there's evidence that its clients have

stuck by the firm

for a simple reason: Many of the people fighting against Goldman, and what it represents, are those who wish they had made money from it instead of losing out.

Odds & Ends

I've read a couple of stories over the past few days that literally made me nauseous. I think they're worth drawing attention to, simply because of how absurd they are:

The very lawmakers who are on the committees deciding how to shape the future of the financial industry

have significant bank-stock holdings.

Judd Gregg (R., N.H.) has $1 million to $5 million in Bank of America stock, along with holdings in

JPMorgan Chase

(JPM) - Get Report

and

Capital One

(COF) - Get Report

, according to

Bloomberg

. Mike Crapo (R., Idaho) recently bought 222

Citigroup

(C) - Get Report

shares.

What's more, Senate Banking Committee Chairman Chris Dodd (D., Conn.), who structured the leading reform bill, is married to a director on the board of

CME Group

(CME) - Get Report

.

Really? Really. These are the people who are promising to handle enormous conflicts of interest at major financial institutions. And yet they're living examples of those very conflicts.

Separately, the

Times

had an

interesting (if horrifying) story

this weekend about the debt-settlement firms that are pillaging the lowest rungs of financial desperation. They promise to help people out of their debt conundrums but mostly just profit from their extended misery. It's similar to the mortgage pros who are

so good at refinancing troubled homeowners' debt

because they helped fuel the subprime bubble by extending bad loans in the first place.

I've heard these ads on the radio and seen offers in print advertisements. I can't believe anyone would fall for the trap -- it's impossible to take an enormous amount of debt, consolidate it into small, worry-free payments and have everyone walk away happy -- but people do fall for it. They're desperate, uneducated and unaccustomed to the fast-talking salespeople who promise relief but deliver more of a burden.

For shame on both counts.

-- Written by Lauren Tara LaCapra in New York

.