A Europe-wide tax on banks will provide funds to ensure that future banking failures are not at taxpayers’ expense, the European Commission said.
Internal Market Commissioner Michel Barnier was unveiling proposals for a compulsory levy on all banks to form the basis of a multibillion-pound fund which would be used to ‘manage’ financial collapses.
The proceeds of such a tax would be collected and administered by national governments, but would not be used directly for bailing out or rescuing struggling banks.
Instead, said the Commission, the reserve would be used ‘only to ensure that a bank’s failure is managed in an orderly way and does not destabilise the financial system’.
‘It is not acceptable that taxpayers should continue to bear the heavy cost of rescuing the banking sector, ‘ Mr Barnier said.
‘They should not be in the front line. I believe in the polluter pays principle.
‘We need to build a system which ensures that the financial sector will pay the cost of banking crises in the future’.
[More]
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Chinese Economy Treads Risky Path. (Ask Japan.)
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Scottish public spending ‘cut by 1.5 billion’
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Updates:
3:20 pm, May 26th, 2010 — Regulators Push for Global Rule on Bank Capital
Notes:
The reason I chose the title I did was because it was first uttered in a famous way by General Anthony McAuliffe during the Battle of Bastogne and sums up my feelings perfectly regarding the new proposed tax on EU banks.
Not mentioned anywhere I could find is an undisputed fact learned through long experience by taxpayers. Banks NEVER absorb this kind of tax — they pass it on to their customers and so taxpayers are being expected by politicians squirming mightily to get off the hook they engineered to quietly agree to this latest screwball argument because in European political minds they are all so stupid they’ll never figure it out.
They could not be more wrong. I say that because if I see it millions of European taxpayers are going to see it also and they aren’t going to be happy campers when the bad news sinks in.
Maybe its just me but wouldn’t it be more prudent to make the bank execs etc accountable for any collapses? If you are on the hook for all that debt you will likely be a bit more careful on who you lend what to and how you play the market with other people’s money.
The article says let the polluters pay. OK but the question for the EU is who are these financial polluters? I would argue … everyone …the politicians, the banks and even the taxpayers who benefited from this. Walter Russell Mead has a good explanation below of what happened in the US financial meltdown. The same argument could be made when the EU politicians had their banks crammed full of PIIGS bonds. In fact the same was true in Canada when Trudeau and Mark Lalonde crammed down our banks throats the necessary funding for their National Energy Program to “buy back Canada” . In other words politicians tend to use banks as their piggy banks. It is indeed about “other people’s money” and the area is full of conflicts of interest. Mead says:
“The increased economic role of the state naturally and inevitably multiplies conflicts of interest and creates moral hazard. American housing policy, widely and correctly blamed as a major contributing factor to the crisis of 2008, was an outstanding example. The combination of interest groups — consumers who wanted cheap loans and rising house prices, banks who wanted a safe and profitable business model, contractors and other businesses with a stake in the home-building industry, cities and towns whose tax bases increase with rapid growth, advocates for the poor who wanted to improve the access of marginalized groups to the Great American Wealth Machine of home ownership — put them all together and there was an irresistible political force driving the United States real estate market and the financial system into more and more dangerous territory. The housing bubble wasn’t an accident; it was the result of decades of national policy and we worked very hard and spent lots of money to make that bubble as big and as dangerous as it turned out to be.”
I’m not very worried about this as a Canadian citizen. The G8 and the G20 are being hosted by Canada this year and if I know Harper his response to all the hoopla will be “What part of NO do you not understand?”
Countries do not have friends — they have interests — and Canada has no interest in bailing out Greece or all the other countries (including the US) who are living way beyond their means.
“Good luck with that one.”
#3, They are reading you from the Hill:
OTTAWA (Dow Jones/WSJ)–Canadian Finance Minister Jim Flaherty said Wednesday (May 26, 2010) that there is no consensus among G20 countries on a global bank tax.
He said a “significant” number of G20 countries won’t impose a tax on their banks.
Flaherty reiterated Canada’s opposition to a global bank tax. He said he would be writing to his G20 counterparts with more detail about the “embedded contingent capital” plan that Canada is proposing.
It’s not exactly brain surgery.
Basically we have governments wanting to tax bank consumers because governments can’t be trusted not to meddle with their banks. Unfortunately its true that governments should not be trusted, and will keep repeating the mistakes they have made, so we do need to find a way to keep their meddling ways out of our banking systems and housing markets. Banks, including ours here in Canada, have operated under taxpayer guarantees for so long that they wouldn’t know what a free market looked like, and should be at more risk for the decisions they make that affect us all.
A new tax is always the answer to every question for liberal elites, but just because taxes are seldom the right answer, does not mean that an answer doesn’t still need to be found. After decades of the too close ties of crony capitalism we do need to add our banks and markets to the long list of things we have to take back from liberal progressives.
Liberal socialists would waste this money faster than they can take it from us, it’s not like they would let it sit there.