Poll: Americans Favor Taxing The Rich
(Bloomberg News) Americans want Congress to bring down a federal budget deficit that many believe is "dangerously out of control," only under two conditions: minimize the pain and make the rich pay.

The public wants Congress to keep its hands off entitlements such as Medicare, Medicaid and Social Security, a Bloomberg National Poll shows. They oppose cuts in most other major domestic programs and defense.

They want to maintain subsidies for farmers and tax breaks like the mortgage-interest deduction. And they're against an increase in the gasoline tax.

That aversion to sacrifice is at odds with a spate of recent studies, including one by President Barack Obama's debt panel, that say reductions in Medicare, Social Security, military and other spending are necessary to curb a deficit that totaled $1.29 trillion in the fiscal year ended September 30, or 9% of the gross domestic product.

"The idea that we can solve our structural-deficit problems merely by asking more of the well-off is totally unrealistic," said David Walker, who was U.S. comptroller general from 1998 to 2008 and now leads a group advocating against deficits. "The math simply doesn't work."

According to the December 4-7 poll, taken days after Obama's commission sounded an alarm over the nation's "unsustainable fiscal path," the public still believes it's more important to "minimize sacrifice" than to take "bold and fast" action to pare the $13.7 trillion national debt.

If anything, the poll shows that public concern over the deficit has ebbed: Forty-eight percent of Americans say the budget shortfall is "dangerously out of control," down from 53% who said that in an October survey.

"The reality is deficit cutting hurts, and the American public is in no mood for further hurt than the slow economy and high unemployment is delivering," says J. Ann Selzer, president of Selzer & Co., a Des Moines, Iowa-based firm that conducted the nationwide survey.

The one place Americans are willing to see sacrifice is in the wallets of the wealthy and Wall Street. While they say they strongly support balancing the budget over the next 20 years, when offered a list of more than a dozen possible spending cuts or tax increases, majorities opposed every one of them except imposing a bigger burden on the rich.

"We give billions of dollars to these corporations, and in my eyes they pretty much just put it in their pocket," says Donald Froemming, a 57-year-old independent voter and unemployed diesel gas mechanic from Moose Lake, Minn.

JPMorgan, Deutsche Bank Vie For Rich
(Bloomberg News) JPMorgan Chase & Co., Deutsche Bank AG and Citigroup Inc. are hiring bankers who cater to millionaire clients as more stringent capital rules reduce returns from investment banking.

JPMorgan, the biggest U.S. bank by market value, plans to increase its wealth management staff in Europe, the Middle East and Africa by as much as 20% a year until 2013.

Frankfurt-based Deutsche Bank is bulking up its Asia business after buying Sal. Oppenheim Group, Germany's biggest independent private bank, nine months ago, says spokesman Klaus Winker.

Citigroup and Goldman Sachs Group Inc., both based in New York City, also are building up their so-called wealth management divisions as Basel III rules are set to curb the risk-taking that led to a seizure of credit markets in 2008.

Leaders for the Group of 20 nations approved plans in November at a meeting in Seoul to more than double capital requirements for banks after the industry posted losses of more than $1.3 trillion from 2007 through 2009. The change provides renewed impetus for banks to focus on less risky and less capital-intensive units such as overseeing assets for wealthy clients, says Cedric Tille, a professor at the Graduate Institute in Geneva.

"It's a natural reaction for banks to go more and more toward fee-based advisory activities in response to capital requirements," says Tille, a former economist at the Federal Reserve Bank of New York. "If they make a mistake, it's only the clients who get upset."

As capital requirements increase, the companies' return on equity-a measure of profitability-will decline. UBS's investment banking unit reported a return on equity of 10.5% in the first nine months of the year, compared with 24% for the wealth management division.

Citigroup, which received a $45 billion taxpayer bailout in 2008 after losses on subprime mortgages and collateralized debt obligations, plans to double wealth management adviseos in North America to about 260. Goldman Sachs Chief Executive Officer Lloyd Blankfein said November 16 that "it's important to get bigger" in private wealth management.

"We've seen a massive uptick in the number of banks seeking to participate as global wealth managers," John Cryan, chief financial officer of UBS AG, Switzerland's biggest bank, told bankers in London on September 30.

The new Basel proposals will reduce the profitability of operations such as underwriting bond sales, lending to hedge funds and proprietary trading, said Professor Christoph Lechner of the Institute of Management at the University of St. Gallen in Switzerland. The lower-margin wealth management business will help plug part of the gap left by investment banking, he said.

"Private banking offers a more stable cash flow over the economic cycle and requires less capital," Lechner said. "But it's tricky because investment banking is incredibly lucrative when the markets are running nicely, in a way that private banking can never be."