Editorials on President Obama’s proposed bank tax have been remarkably harmonious, with the majority of media outlets saying that while it may be politically motivated, the plan isn’t necessarily bad economic policy.
Even the conservative opinion page of The Wall Street Journal, though critical of the tax, complained mainly about Obama's choice of target.
“The real Tarp losers” – including the automakers, Fannie Mae and Freddie Mac, and delinquent mortgage borrowers – are exempt from the tax, an editorial said. “In other words, the White House wants to tax more capital away from profit-making banks to offset the intentional losses that the politicians have ordered up at Fan and Fred.” And the Journal’s “Heard on the Street” column said that while “politics is no doubt behind this tax, …it also is a valid attempt to claw back some of the subsidies that financial firms received when the government backstopped debt issuances during the crisis. It should, at the margin, discourage financial firms from becoming too reliant on market funding. And that includes nonbanks, like General Electric, which was one of the biggest beneficiaries of backstops and may not skirt the levy.”
Perhaps less surprisingly, a Washington Post editorial said that, despite a few flaws, the proposed tax on banks is good policy. “The burden of this fee on the financial industry, and, by extension, its clients, would be modest. And it is focused on activities funded from debt, thus minimizing the impact on commercial bank lending, which is funded by deposits.” Post columnist E.J. Dionne wrote that it is a "matter of both justice and political necessity." He went on: "The best thing that could happen to Obama would be for him to have a fight or two with Wall Street and the big banks on behalf of balancing the budget."
Some commentators said that, if anything, the tax doesn’t go far enough.
Peter Boone and Simon Johnson at the Baseline Scenario blog wrote, “Yes, a new tax on these profits will raise money. But it will not prevent a major collapse in the future. There is no use discussing tough regulation when the previous regulators are still in charge, and they refuse to admit they were part of a system which egregiously failed.”
The New Yorker's James Surowiecki wrote that the proposed tax, "doesn't solve the too-big-to-fail problem. And it's arguably too small, although I think one barrier to making it bigger ... is that the balance sheets of at leat some of the big banks are still a bit shaky, and taking substantial amounts of capital out of them this early in the recovery may have seemed injudicious. But for all that, "it's a good proposal that will raise a signficant amout of money ($117 billion over ten years is not, even by today's standards, trivial) and will provide a disincentive (a too-small disincentive, but still a disincentive) for banks to keep getting bigger."
The most critical commentary we found came from the free-marketeer Financial Times' Lex column, which said, ”dressing this up as a just victory for the public purse is disingenuous – troubled asset relief programme bank investments are set to generate a profit for the US Treasury ... True, as a percentage of overall earning power, the tax looks manageable … But its precedent and longevity is unsettling.”
Commentators also seem to think Obama’s prospects for getting the proposed tax enacted are good.
An editorial in The New York Times noted that bankers’ objections to the tax proposal have been “muted,” adding, “Maybe bankers do know a little bit about shame — or at least about public opinion polls.”
And Reuters Breakingviews columnist James Pethokoukis wrote, “The U.S. Congress, particularly the Senate, has been a graveyard for aggressive financial reform. And banks are hoping the new bank levy will suffer a similar fate. They shouldn’t count on it. A clever design and a determined White House push mean Wall Street may have to pay up.”
