James Pethokoukis

Politics and policy from inside Washington

More on the Obama bank tax

Jan 13, 2010 19:07 UTC

My pal John Carney takes a crack at it:

1) Let’s start with the idea that we’re going to tax banks based on “riskiness.” How on earth do we expect the government to assess this? The government has an absolutely awful track record when it comes to assessing risk. Before the crisis, regulators put in place mandatory capital requirements that they believed were “risk weighted.” The result was the massive over-indulgence in risky mortgage backed securities that almost destroyed the financial system. A risk tax would just result in new pressure for banks to adopt the regulatory view of risk. No thanks.

2) The other idea floating around is that the tax would be levied on “bank profits.” That means the government would wind up in the same position as shareholders pushing for short-term gains

3) More importantly, there is no indication that the government has a way of evaluating the proper size of banks. This means that a tax on size will likely encourage banks to be too big or too small.

COMMENT

Until America gets over this silly populist fever, bad legislation will be forthcoming. Pray it doesn’t cause too much damage.

Posted by gotthardbahn | Report as abusive

Here comes Sarah Palin and the anti-Wall Street GOP

Nov 20, 2009 17:08 UTC

Don’t interpret passage of the watered-down Kanjorski amendment as the peak of the “break up the banks” movement. It may be about to get some new allies on the right, folks tired of Big Government, Big Money and crony capitalism.

For the moment, though, it was arguably the best that Representative Paul Kanjorski, a Pennsylvania Democrat, could have gotten through the House Financial Services Committee. All the committee Republicans and even some of the Democrats voted against it. And even in its much-diminished state, the Kanjorksi amendment would likely be weakened further in the Senate. At the same time, the Obama administration seems little interested in such pre-emptive powers.

Wall Street, however, is hardly getting any more popular with Main Street. The Goldman Sachs Apology Tour is evidence of that. And there are mid-term elections in less than a year. Republican candidates will probably do well as high unemployment continues to drive voter anger at incumbents. As Gallup diplomatically puts it, “Republicans seem well-positioned to win back some of their congressional losses in 2006 and 2008.”  More accurately, fear of losing the House is now running high among congressional Dems.

And all those new Republicans are likely to be infused with the ethos of the Tea Party movement: anti-TARP, anti-Fed (the House GOP is already there on this), anti-bailouts and anti-Wall Street. It could be a group of newcomers, as John McCain recently said, that is populist, protectionist when it comes to China and the yuan and pro-financial regulation.

Sarah Palin could be a harbinger. Although she diligently promotes the wonder-working power of Reaganomics in her autobiography, she also warns about “the return of corporatism – government collusion and co-option of big business.”

On the web, right-of-center bloggers wrote favorably of a recent proposal by Bernie Sanders, the socialist independent senator from Vermont, to break up the banks.

Even among conservative intellectuals, there is little love for an unrestrained Wall Street these days. University of Chicago economist Luigi Zingales argues that “the finance sector’s increasing concentration and growing political muscle have undermined the traditional American understanding of the difference between free markets and big business.” Like a 21st century Teddy Roosevelt, Zingales would use anti-trust law to disperse financial power.

And one veteran Republican politico says he would be surprised if the 2012 GOP nominee wasn’t far tougher on Wall Street than President Barack Obama.

So it isn’t hard to imagine that the next incarnation of Congress — filled with “free-market populist” Republicans — might take another look at the state of Wall Street and conclude, as has Alan Greenspan, that any firm too big too fail really is too big to exist.

COMMENT

If she isn’t the biggest jerk,even in the Republican party,who is ? This is a vile,stupid,moronic idiot. A crass about as rogue as any other neo-con. How can such a conformist be a rogue ?

Posted by Dominick | Report as abusive

‘A whole mess of crazy’ coming from Capitol Hill

Nov 20, 2009 14:11 UTC

That is how one Congress watcher from the financial industry describes the current state of affairs, from the Fed audit bill to calls for a transaction tax. I think this William Greider piece gets at the heart of it:

The center is not holding. … It feels like carnival time, when up is down and down is up, when humble folks parade as kings and queens and the reigning royals are dressed as clowns. … The most startling evidence of reversal is Chris Dodd, chair of the Senate Banking Committee, who has been a loyal friend of Wall Street and especially Connecticut-based insurance companies. Dodd proposes to strip the Fed of its regulatory functions because of its “abysmal failure” to protect the public, and to replace it with an overarching regulatory administration. …
Taxing Wall Street is a more provocative departure, but some representatives are warming to the idea, drawn to Oregon Representative Peter DeFazio’s appealing Let Wall Street Pay for Wall Street’s Bailout Act. A very small excise tax on all financial transactions–trading stocks, bonds and derivatives–could yield hundreds of billions in revenue. House majority whip Jim Clyburn suggests the securities tax is “a painless way” to pay for highways. …

Senator Bernie Sanders asks another one. If some banks are “too big to fail,” why not just make them smaller? His bill would require Treasury to identify and break up too-big financial institutions within one year. Goldman Sachs and JPMorgan Chase are reacting with alarm. They do not normally worry over the senator’s progressive thinking, but what’s dizzying is that former Fed chair Alan Greenspan has embraced the same concept. When the socialist from Vermont achieves bipartisan consensus with the right-wing Maestro, can Barack Obama be far behind?

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