The main headline in Saturday's Financial Times was “Bankers in favour of paying global tax”. A more newsworthy headline than “man bites dog” and only a little behind “Pope not a Catholic”. The bankers quoted were Josef Ackerman of Deutsche Bank and Bob Diamond of Barclays; so you might suspect that there was both more, and less, to their enthusiasm than met the eye. You would be right.
Both gentlemen expressed support for a levy on banks to fund an international rescue fund for institutions deemed “too big to fail”. Implemented globally, such a plan would not change the competitive position of individual banks, although its universality raises the likelihood that the tax would be passed on to savers and borrowers. The fund would secure stability of the financial system while avoiding future burdens on taxpayers.
Perhaps. More likely, by institutionalising the concept of “too big to fail”, the scheme would aggravate the underlying problem of moral hazard. It would also transform state funding of the banking system from an exceptional response to a dire emergency into an expectation, even an entitlement.