As Paul Krugman noted today, we're in the slog period of the Great Recession, and at the banks that means two things. First for investment banks that rely on trading, like Goldman Sachs, it means big profits. Second for commercial banks that rely on the strength of the general economy, like Bank of America, it means big trouble.
Krugman's frustrated and so am I. We spent hundreds of billions of dollars to save the banks in order to save the economy. But one year later, as Goldman gets ready to pay its largest bonuses ever, it seems we've succeeded mostly in saving the banks who are best at making profits while the economy continues to sputter and our deficit continues to re-write its own Guinness Record. Can we fix this by just, well, taxing Goldman Sachs a lot?
Maybe! In Britain (via Free Exchange)...
ministers are drawing up plans for a tax raid on Britain's banks worth hundreds of millions of pounds, The Sunday Telegraph has learned.
The radical move, being considered as a way of forcing banks to pay a price for the taxpayer-funded bail-out of the financial system, could include a one-off "windfall" tax on profits.
Kevin Drum is meh about doing this for Goldman. I'd say there's an elegant symmetry to it -- We used taxpayer money to bail out the bankers. Let's use bankers' money to bail out the taxpayers! -- but it's also highly unrealistic. Although I think the bailout managed to be exceedingly generous to the folks at Goldman, I feel icky about punishing success ex post facto. I do wonder though whether politically this idea might gain momentum: That banks who are succeeding "too much" in the turnaround might face special pressure -- either congressional or reputational -- to pay back their success.
Aha, Gawker's on the case.