Political Theater

Today's headlines include, "Obama to Announce Tax Plans for Banks". The gist of Barry O's plan is that banks with assets of $50 billion or more will pay a special tax for the next 10 years as a punishment for presenting systemic risk to the economy and in an attempt to discourage large bonuses being given to management.

Only an Ivy League ahole surrounded by other "intellectuals" who are too smart to have ever participated in the real economy could dream up such a ridiculous idea. Clearly the true intention of this tax is to try and hoodwink the citizens of America into thinking that Obama is somehow outraged at the banks and is going to stick it to them. Anyone who thinks through this farce realizes that the bankers will have nothing stuck to them by this absurdity.

For starters, these publicly traded financial institutions will simply deliver less to their owners/shareholders because of the penalty tax. The joke is on the little guy whose pension fund is an owner of Citi, Goldman Sachs, JP Morgan and the like. All this nonsensical talk of limiting bonuses, discouraging bonuses, taxing bonuses is a red herring. There is only one reasonable, ethical, moral, and effective way to limit bonuses given to bank employees and that's to actually provide for the shareholders/owners of these companies to have the appropriate voice in the discussion. Part of the great myth of our modern day stock market is that it is an efficient allocator of capital that provides for those with capital to purchase a portion of businesses and reap the profit of such ownership. Yet in reality the shareholders/owners reap little or no reward from their ownership. Unless a firm pays a dividend the owners get absolutely nothing for risking their capital to be an owner. They are at the mercy of the market (the increasingly manipulated market) to determine if their interest will ever be worth anymore than they paid for it. Who in their right mind would ever purchase a company or a portion of a company, knowing that the cash it generated would not be shared with them, that they would have no say whatsoever as to where that cash was allocated, that the managers of the company could chose to simply give all of that cash to themselves...only in the stock market is anyone willing to do this. You wouldn't buy a sandwich shop under those rules. So to my point, the way to control bonuses is to completely overhaul how publicly traded companies are governed. The board of directors would have to be made up of representatives of the largest shareholders. More specifically to my point, the new tax will simply hurt the owners of the company--anyone owning stock mutual funds, receiving a pension, 401k...most likely you. It will not curtail bonuses, it will not hurt the management of these institutions.

All of that is really a side note. The big issue is that we now have acknowledged that there are financial institutions that are large enough and complex enough to present systemic problems to our economy, or at least this is the message we've been told with the "too big to fail" mantra. If this is the case it only takes an elementary education to understand that the solution is not to levy a special tax on such institutions but rather to require them to be dismantled until they are no longer large enough to present said risk. This is not rocket science and Bary O and his team of geniuses know this perfectly well. Too big to fail means that it is too big to exist without creating unnecessary risks, simply put. Instead Bary O is going to produce this piece of garbage penalty tax and try and convince the masses that he's on their side and really sticking it to the "fat cat bankers" as he so eloquently called them on 60 Minutes.

Expect to see the "fat cat bankers" do their best Br'er Rabbit imitation concerning this farce, pretending to be outraged by all of this. Just as disturbing expect the libs to say how great it is that Barry O is taking a stand that is representative of the growing populist anger towards the bankers, while the conservative talking heads will express outrage about raising taxes and how it will cause the banks to lend even less. Neither side understanding or caring about the real issues at hand. Just another red/state blue state fighting point while both the red and blue continue to be raped and blame each other for it while the real perpetrators continue to put our entire economic system at risk.