Bash the bankers

by Ed Bowsher on 15 October 2009  |  5 comments
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A bunch of bankers got lucky. Very lucky. They should now pay a dividend to the people who made that good fortune possible. You and me. The ordinary taxpayers.

Peter Mandelson was surprisingly forceful about banker bonuses on Channel Four News tonight. 

Jon Snow asked Mandy whether he had a 'stick' he could use to punish the bankers after Goldman Sachs' record payouts. 

Mandy replied 'yes.' The FSA could increase the amounts of capital that Goldman is required to hold. That would reduce profitability in future years. 

Now that's fine as far as it goes. I'm delighted that Mandelson recognises this is a serious problem. But I think there's another possible solution. 

Why don't we impose a windfall profits tax on JP Morgan and Goldman Sachs? 

I'd normally shy away from windfall taxes. Why should the government punish businesses for no other crime than being successful? 

But this is a very different situation. Both banks have prospered thanks to the rescue effort of the US and UK governments. Working together, these governments could now impose such a tax. 

Sure, Goldman has paid back the state aid it received, and yes, Goldman and Morgan were a bit more prudent than many of their rivals during the boom. And that prudence was one of the reasons they survived. 

But it was only one reason. The massive government rescue of the financial system created an environment in which Goldman and JP Morgan could prosper. What's more, it was an environment in which the two giants of Wall Street suddenly faced remarkably little competition. 

Let's get real. A bunch of bankers got lucky. Very lucky. They should now pay a dividend to the people who made that good fortune possible. You and me. The ordinary taxpayers. 

Postscript: Yes, Goldman and JP Morgan would no doubt do their best to avoid the tax through the clever use of loopholes and tax havens. It might be a tough fight for governments and regulators. But it's a battle that needs to be fought. And if the whole of G20 was signed up to the fight, I think the governments just might win....

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