Those Banking Levies

Just a very short note on the reaction to the levy on the banking industry being proposed by the administration.

They are a good thing.

The hysteria in the financial media should be ignored. Yes: the levies are a tax. Excellent. Banks rent seek by exploiting the safety net we provide for their own private gain. So an extra tax is entirely reasonable. It is a way of extracting a return for the taxpayers on the extension of that safety net.

It is silly to decry the existence of moral hazard and then also to criticize the government’s attempt to charge for the support it provides banking. It is lame to go nuts about deficits and then wail on about an effort to raise some cash to offset those deficits.

I could go on, but you get the picture.

The only fault I can find in the suggestion being floated is that it attacks bank profits which can easily be passed along to customers as higher fees. I would prefer to go after the bankers themselves: tax their bonuses. They have shown an awe inspiring disconnect with society as a whole by paying out record bonuses a year after we saved their bacon. So hit them where they will notice it. Get their attention. Copy the British who have implemented a special 50% surcharge on large bonuses.

Somehow, someway we have to get bankers to pay attention to reality.

That’s why those levies are a good thing – but only in the context of proper and sweeping bank reform.

Update, Jan. 14th:

FYI: The Treasury Department has sent out this fact sheet with the details of the proposed levies.