Argument: Bank tax will not reduce risk-taking at banks

Issue Report: 2010 US bank tax


“Bank tax won’t solve problems.” Denver Post Editorial. January 14, 2010: “we question whether it will be structured fairly and if it truly will discourage the kinds of risky behavior that led to the financial crisis — and if that’s even the proper role of this particular tax […] Isn’t it the role of regulation to expose and even prevent the use of the crazy derivatives that led to the recent credit crisis? It’s clear that during this last crisis the markets were incapable of assessing the risk that financial institutions were taking. […] Greater transparency and reporting requirements would give the markets the ability to analyze risks and set value accordingly. […] We’d like to see more progress on those fronts rather than assessing taxes that very well could be passed on to consumers and shareholders.”

David Callaway. “Obama bank tax won’t stop risk party.” Market Watch. January 14, 2010: “The problem with trying to hit Wall Street in the wallet is that its wallet is too thick. A British plan to tax banker bonuses, unveiled last month, failed miserably, as most banks just said they’d eat the taxes themselves — and still pay higher bonuses. What else you got, Gordon Brown?”

Stephen Spruiell. “A note on the bank tax.” National Review. January 14, 2010: “The bank tax, by itself, would not discourage risk-taking or reduce moral hazard, but a dissolution authority could do that by giving policymakers a credible alternative to the open-ended, ad hoc bailouts we’ve sadly come to expect.”

“Bank Tax Misses the Real Bailout Deadbeats in Detroit and DC.” Heritage Foundation. January 15, 2010: “The plan also will do nothing to help reform the banking system. Financial regulatory analyst Karen Shaw Petrou tells The Washington Post: ‘The new big-bank tax is just like charging a nickel sin tax on a half-gallon of cheap liquor — it may make moralists feel good, but it doesn’t do much to stop bad behavior.'”