President Obama wants to levy a "financial crisis responsibility fee" on the 50 largest banks, to recoup expenses for the Troubled Asset Relief Program. The fee — more popularly known as the Tarp tax — could raise up to $90 billion over the next 10 years. But if the intent is for banks to repay society, wouldn't it be better to have them perform a much-needed community service? Rather than fine banks, make them create jobs.
Banks could pay the equivalent of this fee in new wages, resulting in an immediate surge in employment. Wouldn't it be ironic if the banking industry, which many blame for the economic meltdown, actually led the recovery? Adding $90 billion of paychecks in itself would be a stimulus package. This could generate between 2.5 million and 3 million jobs immediately — good ones, too.
It is proposed that all banks, according to their size, be required within the next six months to hire at least one unemployed person. Individuals would be assigned to a specific job, offering assistance to people and businesses in low-income areas, and banks would have to retain this position for a minimum of two years. This minimum would ensure the impact is immediate and ongoing, and compliance could be checked easily during the usual periodic bank examinations. Besides quality jobs, this initiative would create additional income tax revenue and help increase overall economic activity.
Each bank would be wise to use these positions to attract bright candidates and develop business opportunities that they might not otherwise be able to pursue. Features of the program would encourage having the new hires concentrate on financing small businesses. Other features could nudge banks to target — and hire in — neighborhoods that are underbanked and desperately need help. In fact, people hired under this program could be called community development officers.
Banks needn't cry foul if they are not currently making a profit. Every bank can squeeze in one more person and, used wisely, that person can help generate more revenue. The entire banking industry, not just the 50 largest, should share some of the blame for the crisis. They owe it to our society. So all would be invited to participate.
With this initiative — call it the Nason Plan — jobs would flow to where they are needed most, with no taxpayer expense or costly bureaucracy. Banks have a choice: Lead the way, or get out of the way and pay up!
Editor's Note: This post is from a guest blogger, Dennis Nason, the chief executive of the executive search firm Nason & Nason and a former banker with Credit Suisse, Citigroup and Wells Fargo.