The Reasoned Review

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Finally, a US Bonus Tax

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This is good news, even if it does fall short of anything one could describe as “punitive” toward the banks. The plan, I guess, is that Mr. Obama collects $90 billion over the next decade (that’s $9 billion per year) from the 50 banks he deems were “most responsible” for the late crisis.

At one point, Mr. Obama channels Michael Moore:

“We want our money back and we’re going to get it,” Obama said. “If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to pay back every cent they received from taxpayer.

Right. And while this $90 billion (over ten years) may go some distance in repaying the $2,000,000,000,000 we printed as a result of this imbroglio, I seriously doubt it’ll cover the tab. Mr. Obama seems to follow the strictest definition of “borrowed” imaginable – he only counts the TARP program (you remember, the first $700,000,000,000 back in November ’08), and not the trillions we’ve simply distributed as behind-the-scenes gifts.

The Washington Post sums it up in a quote:

The new big-bank tax is just like charging a nickel sin tax on a half-gallon of cheap liquor — it may make moralists feel good, but it doesn’t do much to stop bad behavior,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, which tracks regulatory issues for financial industry clients.

Exactly. I would hasten to compare this half-assed bonus tax to the one recently levied in Britain and France (50% of all bonuses, whether or not your bank received a bailout). These taxes have a punitive element to them that the US counterpart completely lacks. What, are we supposed to feel good because our government finally worked up the nerve to ask for some of the money back? The towering levels of fraud and malfeasance perpetrated by our financial sector deserves, I think, a little more than a light admonishment and the extraction of a promise of repayment.

As always, any talk of “financial regulation” and “congressional oversight” (let alone “repayment”) mean absolutely nothing without mentioning the Glass-Stegall Act. You know, that rule they made after the Great Depression that said “commercial” and “investment” banks must be separate entities? The one whose repeal in 1999 allowed our banks to assume epic risk, gamble away people’s 401(k)s, and eventually bring the whole system down? Yeah, that one. If we don’t correct the shoddy legislation that allowed this crisis to happen in the first place, we’re just setting ourselves up for another one however many years down the road.

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Written by pavanvan

January 15, 2010 at 12:49 pm

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