Obama tax is a punitive step for rescued banks

Four of Wall Street's masters of the universe were summoned to Capitol Hill last week to explain the role their institutions played in the financial crisis. Jamie Dimon, the JPMorgan Chase Chief Executive; Brian Moynihan, the new Chief Executive of Bank of America; John Mack, Chairman of Morgan Stanley; and Lloyd Blankfein, Chief Executive of Goldman Sachs, were presented like criminals in a police line up.

Their testimony to the Financial Crisis Inquiry Commission was high on theatre but did little to reveal anything new about how Wall Street got us into the recent economic mess. Of more importance was an announcement a couple of days later that the Obama administration would levy a tax on financial institutions in order to recoup some of the bailout money put up by taxpayers. The levy is to be given the rather ironic name "the financial crisis responsibility fee".

The US is one of several countries looking at how to recoup the money used to prop up the banking system over the past couple of years. Thanks to the stubborn determination of banks to go on paying their staff huge bonuses, these taxes are likely to be more punitive than might otherwise have been the case.

Indeed, public anger towards the banking sector could have implications far beyond public grillings and special taxes.

There is so little sympathy for fat-cat bankers that any financial institution getting itself into trouble in the future might just be allowed to fail. This would be tantamount to cutting off our nose to spite our face but the self-serving behaviour of bankers today is making it even more likely.

 

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