economics

January 17, 2010

Too Big To Fail Tax

Filed under: Uncategorized — ktetaichinh @ 7:29 pm
Tags: ,

The goal here isn’t to raise money — its to force the TBTF banks to become smaller — to break up the Citigroups and the Bank of Americas. This tax will restore competition to the banking industry.

These jumbo firms are the ones that can and will bankrupt the FDIC;  They are the ones that put the entire system at risk. The bailouts reduced competition for them, and allowed a concentration of power that has been unprecedented.

Penalize them.

It could in theory appeal to both parties out of a sense of self-preservation: The GOP recently rediscovered the evils of Deficit Spending (now that they don’t control the White House); Democrats (excepting  Clinton) tend to be big tax & spenders, and have usually paid mere lip service against the deficits. But a TBTF Tax could have bi-partisan appeal.

If we as taxpayers are on the hook for past and future excesses of bankers, we have the right to a) protect ourselves and 2) exact a payment, both after the fact and in anticipation of the next crisis.

Despite the theatrics we are likely to see today from the Financial Crisis Inquiry Commission hearing, there is a possible solution. If our broken Congress cannot regulate the Too-Big-To-Fail banks, at the very least, we can tax the hell out of them.

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