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The beleaguered American taxpayer deserves a break. The housing-led financial crisis begat trillions of dollars of red ink.
Now the financial regulation reform bill, which is supposed to fix the things that caused the crisis, promises — you guessed it — more red ink.
The Congressional Budget Office puts the price tag at $19 billion. But with Democrat conferees busy stuffing the bill full of items from their personal wish-lists, who knows how big and expensive the legislation might get?
It's not that raising revenue isn't on the radar screen. The administration continues to push its so-called Financial Crisis Responsibility Fee — the "bank tax."
It stems from the benighted Troubled Asset Relief Program, which empowered the federal government to recoup the costs of the financial bailouts, if those costs are not returned by way of recovering asset values within five years.
Why A Bank Tax?
But there is no good policy reason to enact this bank tax — and certainly not now. The law permits Congress to wait as late as 2013, and waiting makes sense.
A crippling bank tax will either come out of bank capital or be passed along as higher borrowing costs — limiting the supply of loans, raise their costs, or both.
This is not what our struggling real economy needs. While modest growth in final sales is a hopeful sign, employers continue to demonstrate no appetite to hire.
It is widely agreed that such circumstances amount to the wrong time to raise taxes. It is even less desirable — even self-defeating — to impose a levy that would constrict the flow of credit to the business sector.
Recoupment of TARP costs will be appropriate (and legally required) once the economic recovery has solidified.
Even then, however, good policy dictates that any proposal distinguish between recouping the money and forward-looking objectives of financial regulation policy.
Too Much Regulation
The former goal is simply about getting the cash back from those who lost it, notably AIG, GM, GMAC, and Chrysler. A tax structured in this way bears little resemblance to the current proposal; indeed it is not a "bank" tax at all.
The second argument is that a bank tax is needed to incentivize reduced leverage and to provide the means to resolve failing institutions in the future.
These goals are sound.
But the conferees are moving on a multitude of related fronts to achieve similar objectives — higher capital requirements for all banks, heavy regulation of systemically important institutions, the legal authority and procedural framework to seize and wind down banks of any size, and "living wills" to expedite the resolution of failing large banks.
Congress is in a hurry, and when that happens we should all be nervous about the potential for unintended consequences from rash action. In the next few weeks both an "Extenders" bill related to taxation and a Financial Regulation bill will be considered. Both bills have the potential for some ...
Far be it from me to tell the crew of public relations officials who now occupy those West Wing offices as a reward for running one of the best presidential campaigns anyone has ever seen, but... If there is any value in President Obama's knocking himself out to dramatize on prime-time television ...
Shortly after his inauguration in January 2009, President Barack Obama removed the bronze bust of Winston Churchill that had been displayed in the Oval Office as a post-9/11 commemoration from Great Britain. Was that just a décor makeover or was it symbolic of unease with what Churchill stood ...
Faced with yawning budget deficits, state legislators are looking for new revenue sources. Many think hiking cigarette excise taxes is the pain-free answer, but they're wrong. This year, Utah and New Mexico have already raised cigarette taxes by $1 per pack and 75 cents per pack, respectively. In ...
At the height of the AIDS crisis in the late 1980s, the Food and Drug Administration was excoriated by AIDS activists for the plodding pace at which it reviewed new drug candidates. The sense of urgency — even panic — surrounding AIDS led to a laundry list of reforms that sped up the ...
Posted By: reggiemasterson(0) on 6/18/2010 | 7:42 PM ET
Restrictions on banks are a fickle method of gaining popular support by "socking it to the bad guys". While it is probably true that banks make more money than they deserve, they won't just lie down and take cuts in their revenues - they'll just change where those revenues come from. 15% of Americans report having been late on a payment in the last year. Whereas late fees affect people only if they are irresponsible, now we will all pay more. ( Source: http://www.creditcardconsolidation.com )
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