Skip to comments.Bankers in favour of paying global fee
Posted on 01/30/2010 10:35:21 PM PST by the invisib1e hand
By Patrick Jenkins in Davos and Tom Braithwaite in Washington
Published: January 30 2010 00:02 | Last updated: January 30 2010 00:02
Some of the worlds most prominent bankers have come out in favour of a global bank wind-down fund, a concession from the industry after weeks of fighting proposals for new taxes in the US and Europe.
Josef Ackermann, chief executive of Deutsche Bank, told the Financial Times on Friday : To help solve the too-big-to-fail problem Im advocating a European rescue and resolution fund for banks. Of course, the capital for this fund would have to come from banks to a large degree.
Bob Diamond, president of Barclays , also supported the idea of a global levy, which could see banks contribute tens or even hundreds of billions of dollars over a period of years.
I think every G20 country would like to have an insurance scheme that would help cover the cost of any future bank failure, he told the FT at the World Economic Forum in Davos. A co-ordinated global system is preferable to an unlevel playing field.
Support has been growing among regulators and politicians for an insurance levy as the best way to ensure that the burden of big bank collapses would not fall on taxpayers. But until now bankers have resisted the idea. They say the impetus for considering a global levy came from President Barack Obamas $90bn balance sheet levy, which will tax banks in the US to recover the cost of an earlier bail-out programme.
Q&A Adding up levys costs for global banks In practice, any new levy would be more like the proposed US resolution fund, which is currently before the Senate.
The House of Representatives approved a bill in December that creates a resolution fund for winding down big companies without the taxpayer expense of the AIG rescue or the damage to markets of the uncontrolled Lehman bankruptcy.
The Senate is considering whether to approve the Houses version, which levies an up-front fee on big banks, or to follow the Treasury in advocating that banks reimburse the taxpayer after any wind-down.
Regulators will be encouraged by the support of Mr Ackermann and Mr Diamond for a global levy. Jaime Caruana, head of the Bank for International Settlements, the umbrella body for global regulation, told the FT the most realistic way to institute a global levy would be to begin with Europe.
A proto global fed, one might say.
They say the impetus for considering a global levy came from President Barack Obamas $90bn balance sheet levy, which will tax banks in the US to recover the cost of an earlier bail-out programme.
Imagine that. Barack Obama promoting a global bank tax.
No bank is “too big to fail.”
Bad banks should go under and their assets sold to the highest bidder.
This sort of tax will only encourage bad investments because they know the government will bail them out.
So why are central bankers stocking up on it?
The banks are in the same state of mind as Kent Brockman when he said, “I for one welcome our new insect overlords.”