There's been a lot of publicity recently about Obama's proposal for a tax on banks which received government aid last year.
He'd certainly have the wind at his back given the widespread populist outrage over the huge bonuses on Wall Street this year.
But since the banks which borrowed money have all paid it back, the proposed excise tax reeks of a "windfall profits" tax similar to the one proposed for oil companies back when the price of oil skyrocketed. And you shouldn't penalize a company merely for being successful.
What the government should do is merely ask the banks which benefited from the AIG bailout to pay that money back to the government. They would get more money ($12.9 billion from Goldman alone) than they would from an excise tax. This would be far more defensible (the banks which took on bad counterparty risk with AIG should never have been recompensed for their bets by the taxpayers). It would abolish the essential unfairness of a tax which was levied merely to get more money from successful companies. And it would quell populist anger (if Goldman had to recompense the government for its AIG payout, those humongous bonuses would be cut back to less outrage-inducing proportions).
Whether the government should be in the business of saving banks it considers to big to fail is debatable. But it should definitely not be in the business of making good on the banks' bad bets so that the banks can then hand out record bonuses to their employees.
The government could impose this payback with the caveat that if AIG ever regains its feet, it could then pay back the banks which had to pay for its failure -- after it pays back the government. (This won't be happening anytime soon.)
This would be fair, and that's all the public really wants.
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5 comments:
I like your bank idea but you need to go deeper:
- Who ultimately pays for the tax on banks? Shareholders and customers!
- If the banks benefited from the loans, market survival, and lower risk, will Obama ask the same of individuals/citizens who benefited from other programs at the expense of my increased taxes?
- If the banks got a risk free trade, so did every leveraged home buyer.....
- The treasury made $52B off the securities it held in interest alone. Do they have to pay it back?
- What about the car companies?
- What about all that other money from TARP that was earmarked for BS projects? Does that get repaid?
The problem with the other potential payors is, they don't have the money to pay anything. I agree, the beneficiaries of the stimulus program should never have gotten that money, but it would be near impossible to get it back from them. Ditto the car companies. As far as the Treasury making money off interest, well, the Treasury is the government, which is supposed to be the people, so that's different. I don't even know what the details of the program would be, but I do think the banks should pay back the AIG money. So far this administration has been one great big Democratic boondoggle; thank goodness the electorate seems to have woken up to that fact. This Massachusetts election is going to be very interesting.
I'm as happy as any to grab my pitchfork and bay for recompense from the financial vandals and moral dwarves who populate the senior ranks of Wall St. And I actually think that the Obama bank tax is much less stupid than it might have been. My dismay is about the lack of leadership in dealing with the important systemic problems. I think what the public really wants is as that when we have low Fed interest rates as a key policy to rescue our economy from a near-death experience, that the benefits feed through to the real economy instead of providing a risk-free opportunity for Wall St to pay itself another $145billion in bonuses from profits that they have "earned" for simply being there. It's complex, but there are people who could get the job done if only Washington wasn't riven with juvenile partisanship and critically ill with conflicts of interest and lobbyosis.
G
Guy -- Well spoken, and I agree with every word. And "lobbyosis" is a great way to put what ails our government. But I still think that payinjg back the AIG money would be a more direct, fairer way to claw back some taxpayer money than an excise tax.
If big bonuses are the problem, then the best way to solve that is to pass a law giving the shareholders of a corporation a bigger say in how the employees get paid (I always thought the shareholders deserved a larger say.)
Too true. Much agreed that it would be both more reasonable and more fair to require banks that got "made good" in the AIG bail-out to pay back what they quite rightly lost as AIG counterparties.
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