Commentaries
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Giving props to Wall Street’s risks
Wall Street would like you to believe that when investment banks take on risk they are largely doing it for the benefit of investors — maybe even you and me.
Bankers say much of the capital that their firms put at risk each day is to complete trades for big corporations, mutual funds, pension funds, hedge funds and university endowments. And contrary to the conventional wisdom, proprietary trading — bets made for a bank’s own behalf — is really just a small part of their business.
Lately, Wall Street’s captains of capitalism have been aggressive in pushing the “we take big risks for our customers, not for ourselves” line of argument.
That’s especially so in the wake of the public furor over the outsized trading gains at the big banks like Goldman Sachs Group, JPMorgan Chase and Barclays and even Citigroup, so soon after the collapse of Lehman Brothers.
Tax Goldman debate heats up
The idea of taxing Goldman Sachs and other banks that engage in prop trading is heating up.
I fully endorsed the idea in a column on Thursday. (i amended my thoughts a bit from earlier in the week). FDIC Chairman Sheila Bair seems to be talking about a similar bailout tax concept. And we may hear more from Bair on the subject next Thursday when she is set to testify before the Senate Banking Committee.
Tax Goldman
Goldman Sachs is entitled to make as much money as it wants from proprietary trading–that is trading stocks, bonds, currencies and bonds for its own account. But as long as Goldman benefits from bonds it sold with a government guarantee, it should pay an extra tax on those prop trading gains.
The Wall Street Journal editorial today proposed a tax along this lines and I think it’s a good idea. It’s not often I find myself in agreement with the WSJ editorial page, but the paper’s edit writers are right in calling for an “FDIC bailout tax.”
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The Wall
