>I’ve linked to a commentary by John Hussman which I hope you will read, it is very similar to my 2010 commentary on financial reforms….but much better. I also encourage you to read Paul Volcker’s Op-Ed in the New York Times here.
Now on to my opinion. I want to make clear that I support the proposals more or less that president Obama has put forth via Paul Volcker, though I completely disagree with this bank fee idea. The Wall Street Journal reported the following:
A key Obama administration initiative is a fee aimed at the nation’s largest financial institutions, the recipients of some of the most government aid since the start of the financial crisis. Mr. Geithner said the fee will ensure that taxpayers are repaid for their assistance.
This is ludicrous and simply a tax on people who use banking services. Make no mistake, corporations do not pay taxes, people do. This fee will be paid by the big banks that needed government help (whether they needed it or not), but they will simply raise fees or increase spreads to pay for it which simply passes it on to the consumer. Let’s not forget that this fee is to compensate taxpayers for the banks causing the failure of our financial system…..at least that is the story. In reality it wasn’t just the banks who caused The Great Panic, they certainly played their part but for politicians to absolve themselves (Republicans and Democrats) of any responsibility and demagogue bankers strikes me as the height of hubris and arrogance. After all, what about GM, Chrysler and Fannie and Freddie….or AIG? It is my understanding that none of these entities are subject to the fee, yet weren’t they part of the problem? I don’t believe anyone should be charged a “fee”, instead we should implement real reform and stop thinking that we can continue as if nothing has changed, it has.
If only it were so simple, a boom caused by banks causes a bust, government saves them, then slowly gets repaid over time…..only that is not how it works. Has anyone mentioned the role of the Federal Reserve?
The bank fee is simply a political tool used to divert your attention from the real issues facing our financial system, unfortunately it detracts from the reforms the administration is pushing that could have positive long term affects for our system.
At the end of the day the bank fee is stupid. Of course, if the bank fee is what has to happen in order to get other reforms that are actually needed through the legislative process and into law….I guess I’m willing to accept it, but I won’t like it.
Scott Dauenhauer CFP, MSFP, AIF