A Sin Tax for Banks
Statement by Andrew Redleaf, CEO, White Box Advisors, a leading investment firm and Co-Author of the upcoming book Panic
“The risk is that the big banks become like tobacco companies or casinos; the government starts by campaigning to eliminate vice and then finds it’s addicted to the revenue. Rather than creating more incentives for government to favor the big banks as revenue sources, the administration should focus on structural reforms to eliminate the huge too-big-to-fail subsidy.
“Under too-big-to-fail the mega banks have been able to borrow far more cheaply than their behavior or balance sheets justify. The resulting cost of capital savings exceeds the total profit of most mega-banks in most years. The most efficient way to eliminate that subsidy is to dramatically raise capital requirements—doubling them would not be excessive—for banks with more than $100 billion in assets. “
