A windfall tax should be levied upon publicly-financed investment banks

Getting serious debates on this site is indeed becoming a problem. Thanks to Pro for offering a serious and timely topic. 1. We both agree that there were investment banks at the time of the bailout. I provided evidence that there currently are no investment banks because they converted to being more tightly regulated commercial banks. Pro did not provide contrary evidence, but rather argued that even though they are not investment banks they are sometimes erroneously referred to as investment banks by Pro and others. the problem with that is that the intent of the resolution is to punish some banks but not others. If there are no banks that fit the real legal definition, then it comes down to Pro and his allies getting to pick who they want to punish and who they don't want to punish based upon how they feel about a particular bank. An indefinite resolution of that nature is unsustainable because it defies the rule of law. It comes down to "The bankers we don't like should be punished." The converted banks favoring large investors as customers, but many ordinary people invest of the stock of Goldman and Morgan, either directly or, more commonly, through pension and mutual funds. If the resolution were enacted the stock values would plummet causing great damage to ordinary investors. it's comparable to people investing in a record company that signs up performers who proceed to make a fortune. Deciding that performers and their agents do not deserve such sums may sound reasonable, but it has the indirect effect of destroying the investments who underwrote the venture. 2. Pro started by claiming the investment banks were "begging on their knees" to get bailed out. I provided evidence that they were in fact forced to take the bailouts. Pro then seemed to agree, saying "the government had no option but to persuade them to accept the money." "Persuade" is used in the same sense that Don Corleone used the word. Contrary to Pro's claim, the government had the option of passing a law to regulate the banks in any way they wish, rather than "persuading" them secretly. However, legitimate regulatory action would have blown the government's illusion of saving the world. With respect to the present resolution the importance is that if the investment banks were begging, then it it would be reasonable to suppose that the government should demand an get something in return. However, since the "help" was unwanted, it is unreasonable to suppose the banks promised something. Keep n mind we are only discussing the investment banks, operations like the auto companies, consumer banks, and AIG (insurance) were indeed begging for bailouts, and in each of those case the government got de facto control of the companies in return. Pro continues to assert that there was some understanding with the investment banks even though they didn't want to be part of the bail out. However, he has provide no evidence of that: not a written agreement, not a government press release, not a press report, and not even blogger speculation. Pro's assertion fails. 3. Pro says, "Goldman wanted to repay their loans as quickly as possible so that they could release themselves from any government intervention and thus be free to pay themselves huge bonuses." Sure, but why not? They were immensely profitable independent of the modest bailouts that they repaid by refinancing on the free markets. They obeyed all the laws and regulation that the government imposed. They made no promises other than repaying the loans, which they did. So therefore they earned what they made, and are entitled to distribute it as they wish. The companies are totally beholden to their stockholders. If the stockholders decide that they can get people at the minimum wage to produce the profits for the company, then they can do so. If they think they have to pay their managers like rock stars lest they leave to start their own ventures, then they can pay them like rock stars. 4. I argued that a retroactive tax is both unconstitutional and grossly unfair. People have a right to know ahead of time what the laws are, and not have the laws changed retroactively. I don't want my taxes of five years ago increased, and doubt Pro would want his increased. Pro said "I accept that windfall taxes are inherently unfair" and explain that is why he would only apply them to the banks he didn't like. The rule of law does not allow you to be unfair to the people you don't like and fair to the people you do like. Government ought to take an obligation to be fair all of the time to everyone. The resolution fails even if we consider only the single factor of changing laws retroactively. 5. Pro again claims that the investment banks agreed to limit their pay, but provides nothing whatsoever to support his assertion. Surely if it were true he could find a contemporaneous folk song or fortune cookie that supported his claim, but he offers nothing. Again, we are talking about the investment banks, not the others who were bailed out. The others are in fact under government pay restrictions. I think it likely those pay controls will cause a loss of talent that puts the companies under for good, but that's a different debate; maybe Big Brother will let up. 6. Pro now clarifies that his tax would be levied retroactively on whatever profit they previously had after taxes. That would effectively put the companies out of business, or at least out of being an investment choice. No one in their right mind would invest in a business that the government has targeted to make sure they never make a substantial profit. Far better to put the money into China, where the basics of capitalism are better appreciated. Now, every time Goldman or Morgan make a huge profit, the government gets half. Effectively destroying the companies means that in the long run the government will get very little. It's bettenot to kill the goose that lays the golden eggs. 7. Pro clams, "if a celebrity chooses to spend his money ... rather than invest it sensibly and they go to the wall as a result, it is only they that suffer. However, when banking executives do the same we all suffer." No, rock stars are paid by fans who get music in return. Bank executives are paid by investors who get profits in return. Pro's whole point is that the profits are very large, so it's clear that the investors are getting what they paid for. Whether the rock stars or bank executives fritter away their salaries is not at issue. The question is whether the enterprise that produces the salaries ought to be allowed to exist, or whether they should be punished for being successful. Bank execs are a whole lot more likely to reinvest their money wisely than rock stars, so there is greater consequent wealth creation from banker salaries than rock star salaries. There are presently no investment banks, the successors to the investment banks are not publicly financed, there were no agreements with investment banks or their successors about their future operations. Weasels like General Motors are in a different category, and they are currently subject to complete government control, including salaries. Retroactive laws are unconstitutional and completely unacceptable in any democracy. The resolution is therefore built on false premises, and all it would do is kill future tax revenues by destroying important profit-making banks. The resolution is negated.