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

The facts related to this debate are not what Pro supposes. In general, I think the banking industry needs regulation, and I think entities too big to fail ought to be broken into smaller pieces. However, Pro has offered a narrow resolution about investment banks and that is what we shall debate. 1. There were three investment banks prior to the financial crisis of a year ago. They were Lehman Bros., J.P. Morgan, and Goldman Sachs. Lehman Bros. went bankrupt. J.P. Morgan and Goldman Sachs were converted from being investment banks to being conventional banks. http://online.wsj.com... Currently there are no investment banks. Therefore the resolution, having no object, is meaningless. 2. Pro offered no evidence that either Goldman or JP Morgan "were on their knees begging to be bailed out." The evidence now seems that it was the government who wanted them to take bailout money. Goldman took only $10 billion and Morgan $25 billion, which are not very large amounts for institutions of their size. The government wanted Goldman and Morgan to take the money so that they could cover the true true disasters, like AIG and Citibank, as just being part of an overall industry problem. I think AIG and Citibank should have been forced into bankruptcy, but that's irrelevant to our current debate. Pro has only made claims about "investment banks" and the resolution is only concerned with investment banks. Goldman and Morgan did not beg for money. "The chief executives of the nine largest U.S. banks had no choice but to accept capital infusions from the Treasury Department in October, government documents have confirmed. ... Obtained and released by Judicial Watch, a nonpartisan educational foundation, the documents revealed "talking points" used by former Treasury Secretary Henry Paulson during the Oct. 13 meeting between federal officials and the executives that stressed the investments would be required "in any circumstance," whether the banks found them appealing or not." http://www.msnbc.msn.com... 3. Goldman and Morgan wanted to pay back their bailout money quickly, but the government would not allow them to do so. http://seekingalpha.com... "JP Morgan feels comfortable they have convinced both the Treasury and Fed that they should be allowed to repay the money along with the first group of banks." http://www.thedailybeast.com... Note *allowed to repay* That is further evidence that they were not begging for the money in the first place. However, they have since repaid the bailout with substantial interest. [Pro's (2)] Therefore they are not publicly financed. Since Goldman and Morgan are neither investment banks nor publicly financed, the resolution to place windfall taxes on publicly financed investment banks is meaningless. 4. The resolution proposes that a tax be "applied retrospectively over 5 years." (retrospective: 2 : affecting things past : retroactive http://www.merriam-webster.com...). Due to a dust up with a king some time ago, the U.S. Constitution forbids retrospective laws, also called ex post facto laws. http://en.wikipedia.org... Beyond the Constitutional prohibition, there is a very strong principle of law that citizens have a right to know in advance what laws apply to their affairs. The resolution is a gross and unconscionable violation of this principle. It is unfair in the extreme to retroactively change the rules of the game. 5. Pro offered no evidence that the investment banks "promised to mend their ways and no longer chase quick profits ..." The reference he provides says the two banks in question oppose certain regulatory changes proposed by the current administration, but it makes no reference to any promises or commitments the banks had made when bailed out. Did Pro just imagine that Goldman and Morgan must have promised something? What? 6. Pro proposes a windfall profits tax of 50%. These companies ordinarily pay about 35% of profits in Federal taxes. When state taxes and regulatory fees are added, it is possible that they would be at or above 50% taxes already. The United States has the second highest taxes in the world, higher than China, for example. Pro has therefore not establish that his proposed tax would be an increase. If it is an increase it is is not the wildly onerous penalty he supposes. My point is that the government is doing enough to "punish" businesses with taxes under ordinary circumstances. Being too big to fail transcends national boundaries. However, it would reduce the ability to regulate them. 7. Pro argues that compensation a the two banks is excessive. I'm inclined to agree, but that's up to the stockholders of those companies to decide, not me or Pro. I also think rock stars and athletes are overcompensated, but hat too ought to be left to the free market. Pro has correctly claimed hat these companies are making gobs and gobs of money, so their employees are earning their salaries. ========== Pro has a right to be angry about something in the financial industry, but the resolution he supports is way off base. There currently are no investment banks, there are no publicly-financed successors to investment banks, they made no promises, and retroactive penalties are unconstitutional and grossly unfair. The resolution is negated.