By Daniel Indiviglio

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Big banks don’t face the daunting new world alone. Though U.S. lawmakers aimed much of their corrective firepower at institutions deemed too big to fail, thousands of smaller lenders were caught in the crossfire. As these community bankers gather in Nashville this week, they’ll grapple with similar regulatory and economic challenges to those confronted by their larger rivals.

The rules for the behemoths are more burdensome. But the tiddlers were hardly spared. Take the Durbin Amendment that shrunk debit card fees, for example. The rule sought to exempt institutions with assets of $10 billion or less. Yet small banks and credit unions aren’t yet guaranteed to dodge the mandate: some will have to live with the same fee cuts because of network routing logistics.

And escaping the new designation stamped on global systemically important financial institutions may turn out be as much curse as blessing for small banks. While they won’t be held to the same stringent capital requirements as their “G-Sifi” peers, they could, as a result, find borrowing more expensive if investors assume the debt of the mega-banks carries an implicit government guarantee.

The newly created Consumer Financial Protection Bureau presents another double-edged sword. It should level the playing field by bringing far more oversight to competitive corners of the banking industry, like check cashers and debt collectors, which previously roamed in unregulated shadows. At the same time, the agency will create additional rules and red tape like new mortgage disclosure forms for little lenders.

Finally, the broad business environment is tough for big and small banks alike. Loose monetary policy will continue to ward off savers, thereby stunting deposit growth. And lenders of all stripes are still reworking their loan underwriting criteria after the housing collapse up-ended risk models. Throw in a generally weak economy and the Independent Community Bankers of America will have more than enough to fill their national convention agenda.

By Daniel Indiviglio

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Apple shareholders must be scratching their heads after the gadget king commissioned a study showing it produces around half a million jobs in the United States. After all, subjective reports like this miss the point. Apple has created $400 billion of stock market value over the past three years. That’s good for the American economy and capitalism.

Ripple-effect estimates like the one Apple released this week are more PR than science. Apple directly employs some 50,000 people. The other jobs alluded to in the study are contractors or third-party support – from applications developers to UPS deliverymen. The numbers reported are rough approximations at best, misleading at worst.

For example, many of the company’s reported 200,000-plus app developers might be employed even without Apple, since they also work on software for Android and other platforms. And third-party support workers are calculated using multipliers based on metrics like sales. But most delivery trucks and jets will carry more than just Apple products, so direct dependence is tough to gauge.

The tech giant has its reasons for commissioning and publicizing a job creation approximation. The company’s late founder Steve Jobs was reported to have told President Barack Obama a year ago that jobs manufacturing iPhones and other gadgets lost to Chinese factories aren’t coming back. It also gives regulators, like antitrust watchdogs scrutinizing Apple’s market position, a sense of what’s at stake.

But there’s a danger to Apple protesting too much. While Apple has a moral duty to ensure that workers assembling its products are not mistreated – the gist of recent scrutiny over its use of contract manufacturers – it has no obligation to ensure full employment in its home market, or anywhere else. In the long run, overstating its case as a provider of jobs may actually give its critics more ammunition with which to attack.

By Daniel Indiviglio

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Barack Obama’s corporate tax plan is a good start. His proposal to reduce the top corporate tax rate to 28 percent from 35 percent and eliminate loopholes is an overdue initiative. But there’s also room for improvement. For one, to avoid boosting the deficit, the president suggests collecting more money from domestic multinationals, which would only make it tougher for them to compete abroad.

The objective is at least clear. The United States has a statutory corporate tax rate higher than most other developed nations, while its effective rate is in the middle of the pack. The 10 percentage point gap between the two figures is stark compared to the negligible one for the rest of the G7. Broadly speaking, the plan would enable Uncle Sam to tax more income at a lower rate. And in theory, that should keep the government out of the business of picking winners and losers.

But in practice, the president’s plan does so, in a bid to boost employment. U.S. companies in subsidy-starved industries like retail would be big winners. Their tax cuts would be paid for by multinationals. Obama wants an unspecified minimum tax on foreign earnings, which would bruise the likes of General Electric and Apple, which compete in lower-tax regimes. Depending on the details, that could affect factors like the cost of capital.

The Obama administration also nods to manufacturers by slashing the industry’s top effective tax rate to three percentage points lower than the ceiling for others. Green energy firms also would benefit from extended subsidies, while fossil-fuel producers would lose precious loopholes.

Despite these accommodations, the president does aim for fairness elsewhere. For instance, he would get rid of the carried interest tax loophole allowing hedge fund and private equity bosses to enjoy low capital gains rates on their regular income. Other archaic provisions also would be eliminated.

By Daniel Indiviglio and Richard Beales

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

If you don’t do the basics of your job, you shouldn’t get paid. It’s a simple concept, but lately it has been a foreign idea to the U.S. Congress. Federal lawmakers haven’t passed an annual budget in over 1,000 days. A new bill could apply a little financial pressure.

The “Pass a Budget Now Act” was introduced on Wednesday by Representative Bill Johnson. The Ohio Republican proposes to stop paying members of Congress after April 15 each year if no budget has passed, until it has. The lost pay would go toward paying off the rapidly growing U.S. debt.

California started a similar experiment when residents voted in favor of Proposition 25 in November 2010. John Chiang, the state’s comptroller, last year interpreted the rule as calling for a balanced budget. Lawmakers had passed something, but it didn’t balance and it was vetoed by Jerry Brown, the California governor. Pay was halted, and legislators later sued Chiang. But something worked: after less than two weeks, a balanced budget did pass.

The situation in Congress is of course different. Though an annual budget process is enshrined in law, some would argue federal lawmakers don’t in practice really need to use it – they can rely on so-called continuing resolutions to allocate funds, the strategy over the past few years. But a budget with both revenue and expense items set out in black and white might encourage fiscal prudence as well as forward planning. After all, establishing a budget is a step any credit counselor would recommend to someone with a debt problem.

Supporters of the new bill could even go further. Members of Congress collect some pretty generous perks, including travel – sometimes by government jet – and top-of-the-line healthcare. Wall Street knows financial incentives are powerful. Stop the paychecks and the perks, and dogma could suddenly take a back seat to pragmatism.

By Daniel Indiviglio The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The fight over U.S. payroll taxes just became exhibit A in political style over substance. Republicans in Congress, who have pounded the table on deficit reduction since last summer’s bruising debt battle, have backed down on a demand that spending be slashed to cover the cost of extending the tax cut. To let it ride for another 10 months will cost $100 billion. So much for fiscal discipline.

It was bad enough when legislators leaned on seized mortgage backers Fannie Mae and Freddie Mac last December to enable 160 million American workers to keep paying a rate of 4.2 percent of their wages, instead of 6.2 percent, into the Social Security fund for a couple of extra months. Now, it’s about to get worse.

Last year, when Republicans refused to raise the nation’s debt ceiling unless future deficits were shrunk, it led to a “super-committee” tasked with finding a way to lop off at least $1.2 trillion from future deficits. The group, predictably, failed. Instead, $1 trillion was automatically cut – a figure that dips to $900 billion if the payroll tax cut is extended.

It’s easy to write this off as election-year politics, but that would neglect the deeper dogma at work. The GOP pledge not to raise taxes obviously trumps any rhetoric around the deficits that have been averaging $1.3 trillion for four years running.

Of course, the Democrats aren’t acting any more responsibly. They’re happy to extend the payroll-tax cut without paying for it, too. And though willing to slash some spending elsewhere, Barack Obama’s party is still unwilling to tackle the real problem: safety-net programs. This was evidenced most recently by the president’s budget plan on Monday.

Despite losing its AAA credit rating, the United States isn’t in any real trouble yet. Its debt held by the public is about 70 percent of GDP – well below Greece’s 160 percent. But America’s ratio is also nearly double what it was just four years ago. The payroll tax fight only goes to show just how little political will there is in Washington, just as in many other capital cities around the world, to seriously address the problem.

By Daniel Indiviglio and Antony Currie The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Paul Volcker is muddying the debate about his own rule. The former Federal Reserve chairman has, along with other individuals, financial institutions and lobby groups, left it until deadline day to lodge comments about U.S. regulators’ proposals for banning proprietary trading. Overall, Volcker’s letter is a handy primer for why the rule is a good idea. That may have been useful when he floated the idea two years ago, but it is devoid of any practical advice for either the markets or their watchdogs.

There’s little point repeating the perils of prop trading. After all, banks have long since given up trying to argue that they should be allowed to keep prop units – even trading supremo Goldman Sachs capitulated early on that one. That said, Volcker still seems to have a very broad definition of what constituted prop trading losses in the crisis: surely only by adding losses created by poor balance sheet management can he come up with “hundreds of billions of dollars” of red ink.

In any event, the debate has now moved on from that. What worries banks and money managers far more is how the regulators define what constitutes market-making for clients. This is no easy trick and most of last year’s 300-page proposed rule was devoted to it. Wall Street’s fear is that too restrictive a rule will impede liquidity.

Volcker initially acknowledges this but then misses the point entirely, sticking with the old line that simply ending prop trading will have no effect. Worse, he’s now shifting gears by arguing that too much liquidity can be a bad thing as it can create asset price bubbles. That may be true. But too little liquidity can also create asset price slumps which in turn can drive up prices both for borrowers and for investors.

That could be a boon for foreign banks. Although they have their own fears about the effects of the Volcker Rule, they would stand to benefit if corporations and investors took their business abroad to markets which have, or could create, better liquidity.

Volcker’s newest argument seems a dangerous red herring. Regulators have more pressing fish to fry.

By Daniel Indiviglio and Richard Beales

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

There’s still a long slog ahead for the unemployed in America. Jobs growth has started picking up. But even at a rate of 250,000 a month, a hair above January’s figure, full employment may not be reached until 2020. A new Breakingviews calculator shows how a faster or slower rate of job creation changes that picture.

The important headline variable is the jobs growth reported in the U.S. monthly employment report – the stronger, the better. But a few other factors also matter when looking ahead. One is population growth, and another is how quickly the labor participation rate increases toward a more typical level. That’s the percentage of the population defined as either working or looking for work.

Since the recent recession began, millions of workers have become discouraged and temporarily given up on finding a job. The labor participation rate has declined from 66.4 percent in 2007 to 63.7 percent in January. Suppose participation recovers to that 2007 level by January 2020. This trend coupled with population growth at the average rate seen between 2003 and January this year would call for almost 200,000 new jobs a month just to hold the unemployment rate – 8.3 percent as of January – steady.

Then there’s the question of what level of joblessness reflects, essentially, full employment, since there will always be people between jobs. The calculator allows this input, as well as the other key ones, to be changed, but starts out assuming that 5 percent unemployment is the target.

With these assumptions, full employment would only be reached again in America in early 2020. If the monthly job creation rate jumped to 300,000, that date would be brought forward nearly four years.

By Daniel Indiviglio

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Florida Republican primary’s big winner tonight may be Wall Street’s most infamous bank. Front-runners Newt Gingrich and Mitt Romney are trying to connect one another to the financial crisis. Gingrich paints his rival as an agent of the giant vampire squid, while Romney criticizes his opponent for being paid handsomely for advising Freddie Mac to inflate the housing bubble. But in a state still in pain from the bust, Romney’s line is winning.

In Florida, the battle occurs through the airwaves. Romney, the former Massachusetts governor, has spent more than $15 million advertising in the state, four times as much as his competitor. One Romney ad, in particular, zeroed in on Gingrich’s role in the housing bubble.

It argued that the former House speaker was paid $1.6 million by Freddie “while Florida families lost everything in the housing crisis.” Such criticism strikes a painful chord in Florida. In Tampa and Miami, for instance, home prices are down about 50 percent from their peak, according to S&P/Case-Shiller’s indexes through November.

Though he doesn’t have the financial firepower of Romney, Gingrich is attacking from a different angle. He has been complaining loudly about his opponent’s connection to Wall Street, claiming that the crony capitalism he says is embraced by President Barack Obama would continue in a Romney presidency. Gingrich even asserted in a Fox News interview this week that Republicans would be letting Wall Street and Goldman Sachs buy the election if Romney wins.

Each criticism is a stretch. Gingrich’s advice hardly led Freddie to suddenly decide to lower loan standards and pour more gasoline onto the raging housing boom. Similarly, Romney is a client of Goldman’s and has received a hefty amount of campaign contributions from some at the bank, but that doesn’t mean he’s in bed with the squid.