Saturday, January 16, 2010

Bank-Friendly

Ezra Klein thinks the proposed bank tax is too small.

The more I think on Obama’s tax, the more it seems like an almost insulting proposal. TARP repayment is a provision of the TARP law. Moving it up from 2013 to 2010 is not a grand populist maneuver. It’s a change in timing. And given that the banks are pulling in record profits right now, it’s a change in timing that actually fits their balance sheets.

The bigger problem, though, is conceptual: Confining the tax to repayment of TARP when we’ve got a massive budget deficit and when further stimulus spending is constrained because no one knows how to pay for it is, well, a huge gift to the banks. There’s just no other way to put it.

There’s a simple way to show that it’s a good deal for the banks and leaves us holding the bag: if the shoe was on the other foot and the banks had to suck up a loss on a mortgage because they were afraid the homeowner wouldn’t like them any more, do you think that would stop them from trying to collect? Yeah, right.