Top of the News: President Obama is proposing a tax on the biggest banks to more fully repay the government for the TARP bailout. That the bankers and their apologists are screaming bloody murder makes it seem like a good idea.
The one cogent argument against it that I’ve run across comes from the New Yorker’s James Surowiecki, who worries that it could undermine the banks’ capital base while the financial system is still shaky. Unfortunately, the big banks invite a tax by promising to hand out billions in bonuses, including to many of the same people who cooked up the crash.
My problem is that the tax idea, while politically popular, nibbles around the edge of real reform. That would include an orderly process and timetable for breaking up the biggest banks and industry consolidation in general; using the pieces of the big banks to rebuild larger, midsize banks nationwide; re-erecting a wall between investment and retail banks; regulating all derivatives and hedge funds; outlawing many “creative” “products” such as credit-default swaps; cleansing industry control of the regulators, and providing much greater transparency of the capital markets.
Also: severely limit lobbying by the big banks. And reinstate fair taxation of the rich — there goes the bonus problem. Some vigorous prosecutions of banksters and serious jail time would do wonders to focus minds on Wall Street.
Oh, and at the risk of sounding like Ron Paul: Audit the Fed. The big banks offloaded who-knows-how-many toxic “assets” onto the Federal Reserve, and the Fed still resists showing the public exactly who benefited from trillions of dollars in lending “facilities” during the crisis.
The Back Story: It takes time to get a true reading on holiday retail sales — the snapshots during the season are invariably optimistic and usually wrong. Now a more realistic picture is emerging.
According to the Federal Reserve’s new Beige Book, sales were better than abysmal 2008 but “far below” 2007 levels. According to the Commerce Department, December sales were off 0.3 percent vs. November. Economists had predicted a 0.5 percent increase. For all of 2009, sales dropped 6.2 percent, the biggest decline since records began to be compiled in 1992.
Pointing to (potentially misleading) quarterly gains, Commerce Secretary Gary Locke tried to be a good soldier for an administration that now, fairly or not, owns this downturn. “While the overall trend is in the right direction, today’s retail sales data show that we have more work to do.” Well, the last part is true, at least.
Today’s Econ Haiku:
They’ll say anything
With taxpayers on the line
You can bank on it