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 "convenient piñatas."
- 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."
- But My, What Useful Politics Guardian's Michael Tomasky chimes in:
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."