January 18, 2010

Will the Administration’s Proposed Bank Tax Create Moral Hazard?

Filed under: Uncategorized — ktetaichinh @ 7:02 am
Tags: ,

At MoneyWatch:

Will the Administration’s Proposed Bank Tax Create a Moral Hazard Problem?, by Mark Thoma: I reconsider yesterday’s contention that the bank tax won’t affect bank behavior. Will it create moral hazard?

Update: See also:

TARP oversight report: ‘Implicit guarantee’ of future bailouts hampering reform, The Hill: Unwinding the Treasury Department’s $700-billion rescue program will be difficult, so long as there is an “implicit guarantee” that the federal government will continue to save failing banks, according to a new report.

The 2008 Troubled Asset Relief Program (TARP) has ultimately prompted banks to adjust “to the notion… [they] will be safe, no matter what,” explained Elizabeth Warren, chairwoman of the Congressional Oversight Panel that has been tracking those dollars.

“The whole market has adjusted to the notion that the big banks will be safe no matter what, and they can start planning their business approaches accordingly,” Warren told CNBC on Thursday. “And thats dangerous.” …


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