Obama Proposals Destroy $50 Billion in Shareholder Value

Over the last week, we described in detail why the new tax proposal is a bad idea. New analysis today reveals that the $90 billion Financial Crisis Responsibility Tax combined with the proposal to introduce restrictions that limit both the scope and size of the largest financial institutions have destroyed $50 billion in combined shareholder value of six firms – Bank of America, JP Morgan Chase, Morgan Stanley, Goldman Sachs, Citigroup, and Wells Fargo.

On January 21, investors reacted negatively to the news that the Administration would seek legislation to limit the scale and scope of their operations. These financial institutions experienced a 4.4% decline in the value of their stocks. Almost $29 billion in shareholder wealth was destroyed in the large financial institutions that were directly targeted by the Administration. Even after adjusting for the decline in the value of the stock market, these institutions experienced a market adjusted return of -3.72% in a single day. Over the eleven-day period from January 11 to January 21, the losses experienced by the shareholders of these six firms, fully wiped out gains these firms had made in the first three weeks of 2010.