The Bill Comes Due For Wall Street

There is plenty of blame to go around for the financial crisis. Borrowers who sought to live far above their means, and buy homes that they could not reasonably afford, are at fault. Regulators and government officials should have done a better job of ensuring that financial institutions didn’t take excessive lending and trading risks, and that mortgage lenders did not engage in inappropriate lending practices. And several financial institutions experienced risk management fail, in their blind rush to maximize profits.

With regards to the third leg of this triangle of responsibility, President Obama’s proposal to institute a tax on certain assets of financial institutions with more than $50 million in total assets represents an attempt to ensure that taxpayer bailout funds are fully recovered from financial institutions that took excessive risks — and what better way to accomplish that then to require the assistance of those institutions that benefited the most from the bailouts.

Some will make the argument that certain institutions were relieved of their obligations to the taxpayer once they repaid the bailout funds that they themselves received. However, at a time when Goldman Sachs recently paid 953 of its employees more than $1 million in compensation, several months after accepting $10 billion in bailout funds — and when Merrill Lynch paid 696 of its employees similar amounts, months after also receiving a $10 billion present — such arguments may have difficulty obtaining much sympathy on Main Street, especially when these banks might not have been in any position to pay this compensation to begin with, had they not been restored to health by the American taxpayer.

The American people shouldn’t be left to suffer and clean up the mess to which Wall Street played a major role in contributing. We need to hold Wall Street accountable for its share of the mess. If Congress approves the President’s tax, perhaps financial institutions will give more careful consideration, going forward, to the downside of making reckless decisions with regards to risk management, and will be extremely hesitant to put themselves in a position where taxpayer dollars are needed to save them. No one should begrudge the right of Wall Street bankers to enjoy fat profits whenever they make good decisions; but in turn, like good capitalists, they need to pay a price whenever they experience epic fail.

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