Tax the big banks!
- February 22, 2010
- 2 comments
- Posted in Banks & Banking, Latest Posts, Taxes, The Economy
America’s banking institutions got rich exploiting ordinary people. The mortgage banks that funded abusive loans. The investment banks that made billions of dollars leveraging these loans for fees. The commercial banks that drowned you in credit-card fees and abusive subprime cards. They ran the economy over the cliff, taking your jobs and savings with them. Now they’re getting their pet Congressmen and Senators to opposed any serious bank reforms. They want to be free to exploit you all over again.
The government ran up huge deficits to save the banks and prevent the country from dropping into another Great Recession. At some point, we’ll need higher taxes to help bring the deficit back down. Who should pay? The banks, first and foremost. Obama has proposed a tax on the too-big-to-fail institutions (otherwise known as “wards of the state”). Some legislators have proposed a tax on Wall Street’s financial transactions, which would catch the daisy-chain buying and selling that make fortunes for hedge funds and investment bankers but do little for Main Street businesspeople.
Here’s economist and Nobel Prize winner Joseph Stiglitz, on why the banks should pay. It’s from his lucid new book, “Freefall:”
A principle borrowed from environmental economics, called polluter pays, offers guidance on who should pay: it is not just a matter of equity but a matter of efficiency. American banks have polluted the global economy with toxic waste, and it is a matter of equity and efficiency—and of playing by the rules—that they must be forced, now or later, to pay the price of the cleanup, perhaps in the form of taxes. This is not the first time that American banks have been bailed out. It has happened repeatedly. The implication is that, in effect, the rest of the economy is heavily subsidizing this sector.
Imposing taxes on the banks . . . can generate revenues at the same time that it improves economic efficiency; it makes much more sense to impose such taxes than to tax good thinks like savings and work.
Naturally, the bankers are warning that, if they’re taxed, the economy will fall apart again. They’re riding the politics of fear, trying to scare us all into submission. But look at them: reporting billions in profits, thanks to the bailout, and paying out the money in bonuses to themselves. At least some of those profits should return to we-the-taxpayers, who made the gains possible. So far, we’re getting the short end of the stick.
There’s another reason to tax the too-big-to-fails. Their protected position gives them a huge advantage in the marketplace. The bigs can raise money cheaply because investors know that they’ll always be bailed out. The mid-size and smaller banks that do the real work of the economy—lending money to businesses to help them grow—wind up paying nearly 1 percent more for capital, which of course they pass on in the form of higher rates on Main Street business loans.
We’ve been exploited enough. Tax the big banks! It’s the fair and smart thing to do.
Tags: bank tax, too big to fail
If the big banks are taxed, wouldn’t the fallout hurt the consumer in the forms of higher fees for checking and savings accounts? Wouldn’t the banks pass the costs on to the consumer by setting up even more outrageous fees for checking accounts and for bounced checks?
That’s what they say, but maybe not. Taxes can be paid from profits, too. Many of the banks, such as investment banks, don’t have consumer accounts, they trade for themselves and institutional customers. In any event, you could stay away from the big-bank cartel by using a community bank or credit union. There’s no talk of taxing smaller banks.