5fld0716_template1 the view from washington frank kelly managing director head of government affairs...

5fld0716_Template1

The View From Washington

Frank KellyManaging Director Head of Government Affairs – Americas

5fld0716_Template1

Legal, Risk & Capital

Everything you wanted to know about Washington and the world…

But didn’t want to make a campaign contribution to find

out…

5fld0716_Template1


The Overview

Where is Congress now and what are they doing and can they get it done?

How will the White House Respond?

’08 Elections Update.

Key Global Flashpoints…

5fld0716_Template1


The Legislative Agenda for the Rest of ’07 and ‘08

The Frame of Reference:

Campaigns now coloring all issues…

“Pay Go” Makes EVERYTHING difficult…

Less Time on Legislative Calendar than you may think…

Drive for 60 seat Democratic majority in Senate; Little chance of Republican recovery in House.

5fld0716_Template1


Legislative Agenda’07 / ’08 (cont’d.)

Appropriations Bills - 12 needed; One finished. Continuing resolutions and veto threats; Eats the clock.

SCHIP - Problems seem to be multiplying and becomes more controversial by the day; Bush vetoed. Will remain a political sore point in 2008.

Tax Reform Bill- The “Mother of All Tax Bills” has arrived…But is not going anywhere…

5fld0716_Template1


Life in Congress: Sub Prime, Chinese Currency & Iraq

5fld0716_Template1


Sub prime is Prime Time…Multiple Bills in motion, including…

Re-open Bankruptcy bill to help stave off foreclosures (Durbin)

Tax break for those facing foreclosure (Rangel) Raise caps on GSE portfolios (Frank, Schumer) FHA Reform (Frank) Massive Reform of Sub prime Market (Dodd, Frank) Treasury’s SIV - What is it, who’s in, and will it work?

But idea of federal bailout is still remote.

5fld0716_Template1


We’re All Feeling the Squeeze…

5fld0716_Template1


Energy/Climate Change Legislation

Energy Bill - Stalled as Dems in House and Senate bicker.

White House Veto pen armed and ready.

Senate moving a major Climate Change bill.

Will combined bills get Cap-and-Trade?

5fld0716_Template1


Taxes: “The Mother of All Tax Proposals” A mega-political food fight?

House Ways & Means Committee Chairman Charles Rangel (D-NY) wants to “strategically” overhaul the US tax code. Chances of getting it done in 2008 are remote – but this clearly is the opening skirmish of a larger battle in 2009. What does Rangel want to do?

AMT Reform – Patch it for `08; Completely eliminate it in `09.

Capital Gains/Dividend Taxes (in 2009) – Raise them (Cap. Gains = 28%; Div. = 28% +) to help offset national health care plan.

Estate Tax (in 2009) – Raise them.

5fld0716_Template1


The “Mother of All Tax Bills” Includes

4% surcharge on all joint taxpayers earning $200k or more. Rises to %4.6 for couples earning $500k or more.

Eliminates the AMT (almost $1 trillion hit to revenues).

Carried Interest on investment partnerships taxed as ordinary income.

Limiting itemized deductions and personal exemptions to pre- 2001 EGTR Act levels for taxpayers earning above $500k.

Goodbye Cap Gains / Div. tax cuts!

Corporate taxes - Corporate rate goes from 35% to 30%

5fld0716_Template1


“The Temporary Tax Relief Act 2007”

One year extension of AMT Patch.

Basis Reporting by brokers of securities transactions.

Carried Interest on investment partnerships taxed as ordinary income.

Eliminate investment managers offshore deferred compensation

Removes tax on discharge of mortgage indebtedness and extends for 7 years mortgage insurance deduction.

Time Running Out: Tax forms needed to be printed by November 7th.

5fld0716_Template1


Financial Services Again in the Spotlight

401(k) Reform - Push for tough new disclosures from plan advisors. Four separate congressional committees

investigating.

Federal Insurance Regulation - Moves being made to create “opt-in” federal regulatory structure (and escape tough state oversight”.

Rating Agencies - SEC and Congress putting them on hot seat; Watch for hearings and new regulations.

5fld0716_Template1


’08 ElectionsUpdate

5fld0716_Template1


Presidential Campaigns…And They’re Off!

*Source: ABC/Washington Post Poll 11/18/07

Iowa

DemocratsObama- 30%Clinton- 26%Edwards- 22%Richardson- 12%

New Hampshire

DemocratsClinton- 36%Obama- 22%Edwards- 13%Richardson- 12%

RepublicansRomney- 28%Huckabee- 24%Thompson- 15%Giuliani- 13%McCain- 6%

RepublicansRomney- 33%McCain- 18%Giuliani- 16%Huckabee- 5%Thompson- 4%

5fld0716_Template1


Presidential Campaigns…And They’re Off!

RepublicansGiuliani- 32.8%Romney- 16.3%Thompson- 14.3%McCain- 11.3%Huckabee- 8.3%

RepublicansRomney- 21.8%Giuliani- 19.8%Thompson- 16.8%McCain- 11.3%Huckabee- 8.5%

Florida:

DemocratsClinton- 47%Obama- 20.4%Edwards- 11.6%

South Carolina:

DemocratsClinton- 41%Obama- 27%Edwards- 12.3%

Source: Realclearpolitics.com 11/18/07

5fld0716_Template1


*source - AEI Political Report

5fld0716_Template1


Primaries Remain In Play…JANUARY 2008

January 3: Iowa* (caucuses) January 5: Wyoming (R) January 8: New Hampshire January 15: Michigan January 19: Nevada, South Carolina (R)January 29: Florida, South Carolina (D)

FEBRUARY 2008 February 1: Maine (R) February 5: Alabama, Alaska, Arizona, Arkansas, California, Colorado

(D), Connecticut, Delaware, Georgia, Illinois, Minnesota, Missouri, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Tennessee, Utah February 9: Louisiana February 10: Maine (D) February 12: District of Columbia, Maryland, Virginia February 19: Hawaii (D), Washington, Wisconsin

5fld0716_Template1


Primaries Remain In Play…MARCH 2008

March 4: Massachusetts, Rhode Island, Ohio, Texas, Vermont March 8: Wyoming (D) March 11: Mississippi

APRIL 2008 April 22: Pennsylvania

MAY 2008 May 6: Indiana, North Carolina May 13: Nebraska, West Virginia May 20: Kentucky, Oregon May 27: Idaho

JUNE 2008 June 3: Montana, New Mexico (R), South Dakota

5fld0716_Template1


Will Voter Turn Out be Bigger in 2008?

American voters are showing higher interest in the 2008 elections than in previous campaigns:

Followed news about candidates for the presidential election very/fairly closely*

September 1987 48%August 1995 47%September 1999 46%September 2003 42%August 2007 50%

*Source: ORC/Pew Research Center

5fld0716_Template1


A Veto Proof Democratic Majority in Senate in ‘09?

Currently: 49 Democrats, 2 Independent 49 Republicans

2008 Elections: 33 seats up for re-election; But key Republican retirements are opening the door to big Democratic wins (Virginia, Nebraska, Idaho, Texas…and others to be named later…)

5fld0716_Template1


“America’s Greatest Geopolitical Challenge.”

Congressional concern is intensifying:– 20% YOY growth of PLA– Growing global demand for

natural resources.– Electronic espionage in US

and among NATO allies. CITIC/Bear Stearns, Huawei

Tech/3Com, others to come… Taiwan crisis in March?

China

5fld0716_Template1


Iran – Iraq as A Proxy War

Current Intelligence Assessment: 2-5 years from nuclear weapon.

Grand Bargain: US Missile Defense for Russian Vote?

US preemptive attack unlikely but odds are rising.

5fld0716_Template1


“Surge” is working

Blackwater Incident sign of success and Iran frustration.

But how to deal with Iran? Saudi Arabia and Gulf States are increasingly worried about “spill-over.”

Iraq

5fld0716_Template1


Venezuela

For now, bark is worse than bite. But Nationalizations, Russian weapons deals, Iran relationship worrisome to U.S.

Chavez needs U.S. money from oil sales and we need his oil.

Recent grab of TV station and resulting riots show instability.

5fld0716_Template1


White House / Congress Spending $9.1 billion FY ’07 for planning. Even more in ’08.

Watch China, Indonesia, Vietnam, and Nigeria for outbreak areas.

Huge boost to biotech globally. Where there is a will, there’s a way.

Avian Flu – The Ultimate Market Mover

5fld0716_Template1


Important Note:

The opinions and analyses expressed herein are those of the author and do not necessarily reflect those of Deutsche Bank AG or any affiliate thereof (collectively, the "Bank"). Any suggestions contained

herein are general, and do not take into account an individual’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. No warranty or representation, express or implied, is made by the Bank, nor does the Bank accept any liability with respect to the information and data set forth herein. The information contained herein is not intended to be, and does not constitute, legal, tax, accounting or other professional advice; it is also not intended to offer penalty protection or to promote, market or recommend any transaction or matter addressed

herein.Recipients should consult their applicable professional advisors prior to acting on the information set

forth herein.

5fld0716_template1 the view from washington frank kelly managing director head of government affairs...

Documents

template1 legal

risk capital taxes

risk capital life

risk capital sub prime

tax bills

squeeze slide

tax reform bill

capital gainsdividend