“Make no mistake. The banking system has become an agent of destruction for the gross domestic product and of impoverishment for the middle class.”
-David Stockman, a director of the Office of Management and Budget under President Ronald Reagan
When a Reaganite advocates for the Too Big To Fail Tax, it may be time for the former Zombie Banks to drop the lobbying effort and just get over it.
I’m not a fan of taxation for taxation’s sake or for punitive taxation, but the losses from TARP are roughly $117 billion, why shouldn’t the TBTF tax raise (which is estimated to raise $90 billion over ten years) be the method with which it is paid back?
Or should you and I just add it to the pile of liabilities and debits we’ve had accumulated on our behalf?
The large banks are now crowing about their recovery, but how many people understand the true cost of this recovery? In his op-ed this morning in the New York Times, David Stockman simplifies it:
In supplying the banks with free deposit money (effectively, zero-interest loans), the savers of America are taking a $250 billion annual haircut in lost interest income. And the banks, after reaping this ill-deserved windfall, are pleased to pronounce themselves solvent, ignoring the bad loans still on their books. This kind of Robin Hood redistribution in reverse is not sustainable. It requires permanently flooding world markets with cheap dollars — a recipe for the next bubble and financial crisis.
Moreover, rescuing the banks yet again, this time with a steeply sloped yield curve (that is, cheap short-term money and more expensive long-term rates), is not even a proper monetary policy action. It is a vast and capricious reallocation of national income, which would be hooted down in the halls of Congress, were it properly brought to a vote.
Rather than mount a defense against having to pay for the losses of the program, the former zombies that were rescued from themselves ought to say thank you and accept the levy as their way of pitching in to clean this wreck up.