Obama's bigger rod for banks
Spare a thought for Lloyd Blankfein, chairman of Goldman Sachs and lightning conductor for the aphorisms that many would say define the surreal economics of the modern financial economy.
First he inadvertently devised the phrase - "Goldman Sachs, doing God's work" - that perhaps best captured the miracle of banks' astonishingly short journey from crisis and rescue to boom revenues and bumper bonuses.
And yesterday he was on the receiving end of a resonant jibe about investment banks' ethics in selling mortgaged-backed securities to clients and then betting the firms' capital that these securities would fall in value.
"It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars," Philip Angelides, chairman of the historic Financial Crisis Inquiry Commission told Blankfein yesterday. "It doesn't seem to me that that's a practice that inspires confidence in the markets."
Mr Blankfein's defence was that Goldman's clients are investment institutions, professionals capable of making up their own minds about what to buy and sell. The regulators allow the principle of caveat emptor to operate in this market - so if Goldman fed stuff to its clients that it was reluctant to eat itself (to adapt a metaphor employed by the chairman of Morgan Stanley, John Mack), that's just how it goes.
Those clients could choose to take their business elsewhere. And what's striking - if Goldman's bumper revenues for 2009 are any guide - is that they haven't done so to any demonstrable extent.
What a world!
It all makes perfect sense to investment bankers but does look a bit odd - and not desperately attractive - to outsiders.
Which is the political explanation for why President Obama is today expected to join Gordon Brown and President Sarkozy of France with a special new tax to bash the big banks.
There are very important differences between the fiscal retribution on banks being inflicted in the three countries.
Perhaps most striking is that Obama plans to raise $120bn from his planned impost, to pay for the cost of the US banking bailout - which is massively more than either the French or British bonus taxes will yield (even on the assumption that the British Treasury receives the few billion pounds that I expect, rather than the £500m odd it has forecast).
There is also a big difference in respect of precisely what is being taxed. Brown and Sarkozy are levying 50 per cent taxes on bonus payments. Obama will be levying - according to initial reports - a charge related to the size of banks' balance sheets.
There is a neat logic to the Obama approach.
He is apparently planning to levy the charge in proportion to banks' dependence on wholesale finance, the credit provided by financial institutions and professional institutions.
Why does this make sense?
Well, when the banking crisis was at full throttle in late 2008 and early 2009, no provider of wholesale finance to the banks lost a penny.
In practice, the banks drew on insurance provided by taxpayers - who rescued both individual banks and the entire banking system - although this was insurance for which neither the banks nor the providers of finance had ever paid a penny.
So Obama has decided to send them a retrospective bill for the insurance. Which is a bit like paying the firemen after they've put out the fire that was engulfing your house.
It is very striking that the levy will be most painful for the likes of Goldman Sachs and Morgan Stanley, which are very dependent on wholesale finance, and less so (relative to their size) for the likes of Bank of America and JP Morgan - because B of A and JP Morgan fund themselves to a significant extent from retail deposits.
This may be irksome for Goldman and Morgan Stanley but it is logical - because retail deposits have since the Great Depression been explicitly insured by an insurance scheme. Levying a second charge on these retail deposits might not seem desperately fair.
That said, many bankers will feel that the Obama bank tax is unfair in any case, because it is retrospective.
If the tax has a sunset clause - such that it will be abolished when the full $120bn is raised - they would have a point (although not one that is likely to resonate with most US citizens).
Funnily enough, and as no less an authority than the deputy governor of the Bank of England, Paul Tucker, has pointed out, there is a strong case for imposing a permanent tax on big banks, to cover the likely cost of potential future bailouts (it is what Tucker would describe as a fee for access to "capital of last resort").
But if bankers will be wincing, Gordon Brown and Alistair Darling will be cock-a-hoop. Their bonus tax doesn't any longer look as though it will massively harm the City's competitive position in relation to Wall Street.
The Whitehouse has been briefing this morning that the tax is expected to raise about $90bn over ten years.
That $90bn is its estimate of the final cost of the Trouble Asset Relief Program, the cornerstone of the US authorities' rescue of its banks.
Some 50 banks will be liable, of which ten to 15 would be the overseas subsidiaries of non-US banks.
I would therefore expect the US arms of Barclays, Royal Bank of Scotland and UBS to be caught by the tax.
The liable banks are those with more than $50bn in assets. And the levy itself will be calculated as I described earlier today.
Insured retail deposits and equity capital will be exempt from the charge. It will in effect be a levy on wholesale finance, at a rate - according to the Wall Street Journal - of 15 per cent (I am a bit puzzled by that figure, because a 15 per cent tax rate would raise well over $90bn).
So, as I have already said, the likes of Goldman - so dependent on wholesale finance - will pay proportionately more than banks with large numbers of retail depositors.
Reuters says the levy will be at a rate of 15 basis points, or 0.15 per cent - which makes a lot more sense.