As banks gird their loins
for bonus season, the administration is doing a little girding of its own. The White House is reportedly considering levying a tax
to help cut the deficit
and discourage "excessive risk-taking." It remains unclear whether the tax
would be levied on all banks, the most profitable banks, or merely on
executive bonuses, so finance commentators are appraising the different options. A number say the tax will do nothing to reduce risk, and accuse it of being a political ploy. Others, meanwhile, theorize about how to make a bank tax work.
- Tax Top Banks, says Simon Johnson
at the New York Times' Room for Debate. These are the banks that "when
they take on large amounts of risk .... jeopardize the economy." The
idea would be to tax these banks into a smaller size.
- Problems All Around 24/7 Wall St.'s Douglas McIntyre
questions the idea of taxing profits, which would "tend to hurt the
best run banks, which in many cases are also the most responsibly
managed." Also, he says, "The press has already pointed out the most
significant problem with
a special tax on banks, no matter on what basis it is levied. Banks are
masters at passing fees on to customers whether those are credit card
customers, large corporations, or home owners."
- Money Raised through Populist Rage "Besides being a move to appease the public," writes Pallavi Gogoi at Daily Finance, " it's also an easy way to
raise money from a business community that is already loathed by most
Americans." Douglas McIntyre
points out that the Fed's $45 billion earnings in 2009 may reduce the
need for the tax where the deficit is concerned. Meanwhile, irate
banking consultant Bert Ely
argues that taxpayers have, if anything, profited from their investment
in bailouts, and the proposal merely reflects banks having become
- Pure Politics, declare a number of commentators. Yves Smith suggests this move is about "sliding poll ratings" rather than Wall Street reform, and Edward Harrison
agrees: "This act of government intervention is not aimed at
addressing the fundamental problems that created the bubble or the
galling asymmetry of record bonuses and double-digit unemployment. It
is merely a populist ploy to cover up the brazen cronyism we witnessed
during the bailouts of the financial industry to arrest the president's
plummeting poll numbers." Smith, a former Goldman Sachs employee, also
adds that "Obama may have changed its mind on where it stands
relative to the banksters, but it has not changed its heart. And it
hearts bankers, big time."
here we will have a major showdown, if Obama wants it, between the
government and the large banks. And he should want it. This is exactly
the kind of fight he needs to take on and win ... there are elements here that could prove
politically popular with both the base and the middle. The base would
be pleased with a tax on banks, and independents would be glad to see
some of the money go toward deficit reduction.
- A Little Cautious Love for the Tax Think Progress's Pat Garofalo
is one of the few to approve of the general idea, saying that there "is
a lot of wisdom" in taxing "too-big-to-fail" institutions. Felix Salmon of Reuters adds that, while he "[doesn't] think there's any easy answer here ... the UK supertax [a one-time heavy tax on bonuses] ... seems to have worked
quite well: banks are doubling their bonus pools and paying half to the
government, raising a lot of money for the public fisc."
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