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The Street Distracted By Rage

It's a shame the House passage of a bill imposing a 90 percent tax on employee bonuses from any company taking at least $5 billion in bailout money is creating such a distraction.

Most agree that bonuses need to be reworked, but they need to be reworked by contract negotiation, not by legislative fiat.

A bill of attainder (also known as an act or writ of attainder) is an act of legislature declaring a person or group of persons guilty of some crime and punishing them without benefit of a trial.

Section 9, Clause 3 of the U.S. Constitution says "No Bill of Attainder or ex post facto Law shall be passed."

The issue is whether the House bill passed violates the constitutional prohibition on bills of attainder.

Regardless of the answer to that question, there is no doubt that Congress is incentivizing institutions to pay back TARP funds.

They are also making it more difficult to participate in government programs. I noted earlier this week that hedge funds I have spoken with were expressing reluctance to participate in the TALF for fear that Congress would pass further ex-post facto laws restricting compensation.

Regardless, the TALF is finally kicking off. Nissan and Ford sold more than $4 billion of bonds backed by auto loans, and Citigroup sold $3 billion of securities backed by credit-card payments.

The Fed announced it has lent $4.7 billion to borrowers under the TALF program. The TALF programs allows investors to borrow from the federal government on favorable terms to purchased asset-backed securities.

Elsewhere:

1) It's a quadruple expiration day (expiration of stock index options and futures, and individual options and futures), so expect a choppy day with high volume.

2) Xerox down 10 percent pre-open, after slashing its Q1 guidance as a result of restructuring charges and lower demand for its printers and copiers. Including a 6-cent restructuring charge, the company now expects Q1 earnings to come in between 3 and 5 cents per share - down from the prior guidance of 16 to 20 cents per share. The company also noted that total revenue fell a sharp 18% in the first two months of the year, with 5 percentage points of the decline due to currency impact.

3) Paying down debt is a big priority for REITs. Simon Property Group is down 8% pre-open. After the close yesterday, the REIT announced that it plans to issue up to 17.25 million shares of common stock and $500 million of senior notes. The proceeds would be used to pay down some of the company's current debt.

3) Citigroup trading up 9% following the bank's announcement that current CFO Gary Crittenden will become chairman of the newly-formed Citi Holdings. He will be replaced by Ned Kelly, the former Head of Global Banking.

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