Obama Tax Targets Wall Street's Top Earners
SCOTT SIMON, host:
This is WEEKEND EDITION from NPR News. Im Scott Simon.
This week President Obama drew from the well of public outrage over Wall Street bonuses. Bankers at top firms are expected to earn nearly 18 percent more than they did in 2008, according to the Wall Street Journal. And President Obama says that he plans to ask Congress to impose a new tax on some of the nations largest financial companies.
Our friend, Joe Nocera, business columnist for the New York Times - he joins us from the studios of the Radio Foundation in New York. Joe, thanks for being with us.
Mr. JOE NOCERA (New York Times): Oh, thanks for having me, Scott.
SIMON: So how would what the White House calls the financial crisis responsibility fee work?
Mr. NOCERA: Well, first of all, it is clearly aimed at punishing bankers for these extravagant bonuses, which just will not stop. So let's be clear about what the purpose is. And the truth is also that the TARP money that they are going to be reclaiming, getting again, the firms that are actually going to lose money on TARP are not the banks that are going to be taxed, it's Chrysler, it's General Motors and it's AIG.
Having said that, the plan is a pretty simple one. They're going to put a tax on the size of the assets. Remember those toxic assets everybody got in trouble with? Banks still have tons and tons of assets, some of them are toxic, many of them are not, and there's simply going to be a tax on those assets. So the more assets you have, the larger the tax. The fewer assets you have, the lower the tax.
SIMON: Now, what about the argument I think banks make that essentially that's a tax on success, and the whole idea of helping them survive was to get business going, not to tax it?
Mr. NOCERA: Well, they do make a point. That is actually a valid point. And let me point out, first of all, that only one banker in the United States has complained about that tax and that's Jamie Diamond(ph), whose firm, JP Morgan, more or less sidestepped the worst of the crisis.
Having said that, a tax like this is in fact going to make it tougher to make loans, which is, you know, another goal that the Obama administration has. The Obama administration's real problem is that it has a series of goals that are very much in conflict. It wants banks to make a lot of loans. It wants banks to be successful, but it also wants banks to reign in practices like bonuses and so on and to slim down so that it doesn't have the size of the assets, it's not too big to fail anymore, and these, you know, this tax very much accentuates the fact that these goals are in conflict.
SIMON: If the public is outraged about bonuses, why not make a provision to tax the bonuses?
Mr. NOCERA: That's a really good question. In England the government has decided that they're going to put a 50 percent tax on all bonuses over $40,000. It's mildly inexplicable why that hasn't happened here. And to be honest, Scott, I think a lot of people think that this this administration, with Geithner as the secretary of the Treasury, with Larry Summers in the White House, really has a deep reluctance to get involved in how these people get paid. Even Ken Feinberg, the so-called pay czar, you know, his mandate is now only two financial companies, Citi and AIG, because everybody else has given the TARP money back.
So I think there is some sort of secret empathy here on the bonus issue.
SIMON: New York Time business columnist Joe Nocera joined us from the studios of the Radio Foundation in New York. Joe, thanks so much for being with us.
Mr. NOCERA: Thanks for having me, Scott, and good luck.
SIMON: Thanks very much.
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