New populism: Don’t bank on it

The president’s tiny .15 percent bank tax is about politics, not reform.

According to a Jan. 16 article in The Wall Street Journal, President Barack ObamaâÄôs proposed bank tax is the centerpiece of the Democratic PartyâÄôs new populism. Apparently, humdrum reviews of health care reform and a tightening special Senate election in Massachusetts mean Democrats are hungry for a surge in popularity and are willing to take a gamble on the American peopleâÄôs disgust with large financial institutions. The tax, which would be levied on 50 of the nationâÄôs largest financial firms, will raise an estimated $90 billion over the next 10 years and, according to the president, is meant to recoup TARP losses from firms that received part of the $700 billion. While many Americans do indeed, âÄúwant [their] money back,âÄù as the president argued last week, on the whole we are less concerned with angry politics than with ensuring the prevention of another financial meltdown and seeing an end to âÄútoo big to failâÄù corporations. If the president, who received nearly $1.7 million from Goldman Sachs and JP Morgan Chase during his campaign, wants to avoid the perception of demagoguery, he should treat this tax as a starting point in the broader fight for banking reform. A larger tax, proportional to a bankâÄôs size, could incentivize consumers banking with smaller community banks and hasten the end of âÄútoo big to fail.âÄù Then again, if the president wanted to prove where his loyalties lie, he would see to it that his top political donors are held to sane debt-to-capital ratios.