Welcome back to James Call: Expert, your source for Snide Commentary from today's Hottest Young Pseudointellectual.
Reader "Kirstin" asks me to summarize this sonnuvabitch:
Obama Gon' Tax Some Banks Somehow'r'nother
New York Times, Jan. 14, 2010
Ok. I can summarize this bad boy real quick. Prez Obama, a big friend of the banks, is catching a LOT of political heat for the fact that the banks are raking in record profits, and everyone else (you, me, our family, friends, the dudes at the bodega, etc.) are starving/not earning frequent flier miles to death. And this anger is totally justified - yes, we DID had to give banks tons of cash to keep the economy alive, but the banks were supposed to invest that cash in businesses that employ people. And they are not doing that. They are instead just sitting on the money, floatin' bonds at well above the effective Fed rate (basically, 0% interest) and rakin' in the cash. These bonds are regarded as incredibly good investments, because everyone on Wall St knows the gov't won't let any of the big banks go down.
This situation is complete bullshit, so of course, there are cries for a "windfall profits" tax, and that's probably what the Obama admin is going to propose.
The problem is, what critics are saying is true: yes, the banks will probably "pass the tax along in the form of higher charges to their customers," both depositors and businesses taking out loans. Which could cause a small credit contraction. Not that that matters a whole lot, because the banks AREN'T LOANING ANYWAYS, BECAUSE WE DID NOT FORCE THEM TO WHEN WE GAVE THEM ALL THE CASH IN THE WORLD, the pricks, but still.
More to the point, a tax is not really what's needed. What's needed is to put some serious pain on these banks, to ensure that they cannot ever engage in the kind of wretched behavior that got us to this point again. What form should the pain take?
First of all, the banks should be broken up. Too Big to Fail, Too Big to Exist. All the Lawful Good economists agree on this point. Secondly, the weird derivative bundles and other "innovations," which were the tools used to get us in this huge mess, shouldn't be regulated - they should be straight-up banned. And finally, we need to insist on no overleveraging of the banks. If you're going to have $75 outstanding in loans, you should have at least $25 on hand to back those loans up, not $1 (for instance).
But - Obama is ideologically committed to keeping the big banks intact. He is a New Democrat, a friend of Big Money nine times out of ten. And shame on so-called Progressives for not realizing this during the primaries - can't y'all read??! Weren't you listening to what the man actually said in the primaries??! True, financial regulatory reform wasn't a cornerstone of his campaign, but a general soft line towards Big Business in general was... how can we now be surprised?
Man, this post is already too long. The point is: this tax is totally cosmetic, probably slightly unhealthy, and completely misses the point. The banks don't need a one-time slap on the wrist, they need to be hacked to death by machetes. And that I why I propose we import Congolese irregulars and use them to police Wall St... to set the tone, if you will.