Thursday, January 14, 2010

Gordon the Moron strikes again

Obamas bigger rod for banks

What strikes me is the last paragraph "Gordon Brown and Alistair Darling will be cock-a-hoop. Their bonus tax doesn't any longer look as though it will massively harm the City's competitive position in relation to Wall Street." So the politicians are happy because they will be encouraging banks to go to the UK to be reckless rather than anywhere else. So next time the global financial system needs bailing out we'll do it on our own?

Posted by inbreda @ 12:46 PM (1474 views)
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8 thoughts on “Gordon the Moron strikes again

  • in fact, now that I think about it, how absurd is it that GB is happy to still attract risk taking banks to these shores, by taxing their bonuses? So – taxpayer gives the banks £1bn, which the bankers take as bonuses rather than use for actually making the bank viable again, and the government takes half of it back in tax… and we’re supposed to be happy? The bankers cause a catastrophe and only take half a billion of our cash and GB actually sees that – and more of the same – as a good result?

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  • mountain goat says:

    “Obama’s bigger rod” !!!

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  • Banks liable to the tax are those with $50bn+ assets. Interesting – some studies reckon that a bank can realise all the benefits of economies of scale at $50bn assets (that’s about 2% of the size of some of the giant banks). After that it’s all about market and political power.

    A tax on large banks is fair because another government support from which they benefit (Citigroup and BofA would already be insolvent were it not for direct government supports) is the implicit ‘too big to fail’ (TBTF) guarantee. Lenders to giant banks know their loans are guaranteed and therefore the giants obtain these loans at rates lower than the rates applying to smaller banks. This is over and above the fact that bigger banks pay lower rates for their loans anyway. After the Lehman collapse and the TBTF noises that came out of that the gap between rates to the giants and the smaller banks grew by about 0.5%. According to one estimate this is equivalent to a subsidy of $33bn per year to the giants at the expense of smaller banks. So a $90bn tax spread over ten years is small in comparison.

    In any case, investment banks should be subject to a gambling tax like other casino operators.

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  • fallingbuzzard says:

    In the end the consumer pays so its pointless but symbolically important.

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  • Goldman Sachs, aren’t these the people who sh*fted Lehmann bros by nabbing the rescue deal meant for them?
    So perhaps that’s what they mean by doing God’s work. Although I thought it was quite smart.

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  • Obama’s tax is a retrospective charge for an insurance policy written by the U.S. government without consulting the banks.
    Brown’s tax is a charge on the distribution of the proceeds of the risk taking that the aforementioned implicit insurance policy covers.

    Obama’s is better because it has a better correlation with the specific risks that would require the activation of said insurance policy.

    However, neither address the cause: the necessity for, and the existence of, the implicit insurance policy. If we had free banking, rather than central banking there would be no need for the insurance policy – but that would be a step away from the concentration of power.

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  • fallingbuzzard says:

    Obama’s is worse because it will never be collected. Just a stunt to try and win mid-term elections, without which he won’t get a second term. Lets be honest, there’s no way in the world that this is going to get through but its enough to keep the masses in their place.

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  • Browns will never be collected either. It will just be offshored to a tax haven.

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