Bair wants a bank-size tax

July 16, 2009

Sheila Bair and Ben Bernanke are on board with the idea of taxing banks to give them an incentive to shrink:

The FDIC will propose slapping fees on the biggest bank holding companies to the extent that they carry on activities, such as proprietary trading, outside of traditional lending. The idea goes beyond the Obama administration’s regulation-overhaul plan, which would have the Fed adjust capital and liquidity standards for the biggest firms, without any pre-set fees.

“What we have suggested is financial disincentives for size and complexity,” Bair said in a July 9 interview. Fed Chairman Ben S. Bernanke told lawmakers last month that restricting size is a “legitimate” option.

This is great news, even if it took Bloomberg a full week to report it. Notes Ryan Chittum:

Another bit of weirdness is that its interview with Bair was on July 9 but is only being reported now. There must have been some sort of embargo for Bloomberg not to report this big news for a week.

Why would Bair give an interview on July 9 but tell Bloomberg her statements couldn’t be used until July 15? That doesn’t make any sense at all. Maybe it took that long for Bloomberg to ferret out the details of what she was talking about: “financial disincentives for size and complexity” is vague, while the idea of charging fees for prop trading is much more specific. In any case, I hope that Bair’s idea gets traction in both Treasury and the White House.


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