Finally, there\’s taxation. Obama wants the banks to self-finance the cost of the next bailout, but his plan is flawed. The existence of such a fund would merely encourage banks to take even bigger risks, while the proposed charge on banks would not be nearly big enough to cover the full economic costs of a crisis. In the UK, it would raise about £1bn a year – tiny in comparison to the spending cuts that are going to be needed during the next two parliaments as a direct consequence of the financial crisis.
But, you see, the banks aren\’t supposed to be coughing up for the £100 billion of the structural deficit. They\’re supposed to be coughing up the insurance fee for the next bailout.
Which, as you\’ve said, is likely to cost about £20 billion next time as this one has done. A £1 billion a year for a few decades to pay for something which costs £20 billion every few decades sounds about right really.
Now whether this is the right thing to do or not is another matter: the point here is simply that you\’re confusing two entirely different things. How much the banks should be taxed for the guarantee they have/will get is very different indeed from how much tax the Chancellor needs for diversity outreach officers.
Am I missing something or are S&P, Moody’s getting away with it?