David Stockman, who was in the Reagan cabinet as budget director, comes out swinging for a too-big-to-fail bank tax in a terrific New York Times op-ed:
In supplying the banks with free deposit money (effectively, zero-interest loans), the savers of America are taking a $250 billion annual haircut in lost interest income. And the banks, after reaping this ill-deserved windfall, are pleased to pronounce themselves solvent, ignoring the bad loans still on their books. This kind of Robin Hood redistribution in reverse is not sustainable. It requires permanently flooding world markets with cheap dollars — a recipe for the next bubble and financial crisis…
The baleful reality is that the big banks, the freakish offspring of the Fed’s easy money, are dangerous institutions, deeply embedded in a bull market culture of entitlement and greed. This is why the Obama tax is welcome: its underlying policy message is that big banking must get smaller because it does too little that is useful, productive or efficient.
To argue, as some conservatives surely will, that a policy-directed shrinking of big banking is an inappropriate interference in the marketplace is to miss a crucial point: the big Wall Street banks are wards of the state, not private enterprises…
Still, there can be no doubt that taxing big bank liabilities will cause there to be less of them. And that’s a start.
— If for some reason you needed another reason not to watch CNBC house clown Jim Cramer or listen to short-term stock prognosticators generally, take a look at his call yesterday, transcribed by MacDailyNews:
“I think investors who are nervous about the dictatorship of the Pelosi proletariat will feel at ease, and we could have a gigantic rally off a Coakley loss and a Brown win,” said Cramer on Friday’s show, anticipating Brown’s win. “It will be a signal that a more pro-business, less pro-labor government could be in front of us… Pelosi politburo emasculation! Everything from the banks, which are usually in the Democrats’ penalty box, or the oils which are despised by this administration for being carbon, could be propelled dramatically higher all of this Tuesday night.”
Coakley lost, Brown won, and the Dow tumbled 122 points, or 1.1 percent.
— Headline of the Day goes to The Wall Street Journal for implying that the United States had descended into Mad Max-style anarchy: “New Wave of Warlords Bedevils U.S.”
Fortunately for us, the paper was referring to Afghanistan, not, say, Alabama.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.