Tumblr Icon RSS Icon

FinReg’s Implicit Tax on Bank Size

By Matthew Yglesias on May 21, 2010 at 10:44 am

"FinReg’s Implicit Tax on Bank Size"

Share:

google plus icon

cash-wad 1

Noam Scheiber explains that one aggregate impact of recent congressional activity is to disadvantage the largest banks:

And yet, perhaps unwittingly, the upshot of financial reform will have been to make it costlier to be a big bank relative to being a small or medium-sized bank—which is to say, it has effectively taxed bigness. That’s because the legislation imposes a handful of new mandates and regulations—like oversight by a soon-to-be-established consumer financial protection agency, as well as limits on fees for debit-card transactions—from which small and medium-sized banks are exempt. Other reforms—such as a bill Congress passed last year to limit hidden credit-card fees and make statements more transparent, and new restrictions on trading derivatives—would disproportionately dent profits at megabanks. These banks tend to have far bigger credit card operations, and are the only bona fide derivatives brokers around.

I don’t think this is unwitting at all. I’m not really certain that it’s all that wise since insofar as these regulations are good policy creating a small bank loophole simply undermines the policy. It would be better to regulate what you want to regulate and explicitly tax large banks if you want to disadvantage them financially. But the word “tax” continues to be toxic on Capitol Hill in almost any context.

‹ PREVIOUS
Sexual Orientation and Your “Sex Life”

NEXT ›
Goldwater and Civil Rights

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.