Bankers’ Sense of Entitlement

January 24, 2010
Editorial
Bankers’ Sense of Entitlement

We suspect most Americans would be baffled to realize that bankers see themselves as victims of the Obama administration’s financial policies. But there you go.

Irate at the administration’s decision to impose a fee on the largest banks, the bank lobby has hired a top lawyer to challenge the levy all the way up to the Supreme Court. Their case seems to rest on the perplexing argument that the fee would amount to a bill of attainder, which singles out a specific group of people and violates their right to due process. But the levy is aimed at a class — very large financial institutions. There are other taxes, fines and fees that operate in the same sort of way.

The push-back against the fee underscores bankers’ peculiar sense of entitlement. They feel entitled to the public support dished out by the Treasury, the F.D.I.C. and the Federal Reserve. Yet they do not believe they should be made to contribute toward the effort to save the economy from their reckless behavior.

President Obama articulated the fee as a way to recover the $117 billion cost of the direct financial bailout. It would apply to financial institutions with more than $50 billion in assets. (Bank of America, the country’s largest bank, would have to pay about $1.5 billion a year.)

Mr. Obama could have gone further. Government assistance to the banks went far beyond the Treasury’s bailout — large guarantees from the F.D.I.C., copious lending from the Federal Reserve, extremely low interest rates. And the damage caused by the banks exceeded $117 billion by an order of magnitude.

A levy on big banks’ assets could also be seen as a way to slow the further consolidation of a banking system that already has too many banks considered too big to fail. It fits the administration’s avowed interest in limiting the size of commercial banks by tightening limits on their market shares. In any case, having spent trillions to drag the economy back from the brink of the abyss, the government needs the money.

And the money is there. Goldman Sachs said last week that it would set aside 35.8 percent of last year’s revenue to pay bonuses. That is down from the 48 percent Goldman doled out for bonuses in 2008. But it adds up to an obscene $16.2 billion, more than 10 times what the proposed levy is expected to cost the bank each year.

Bankers would do well to stop trying to avoid this fee, and they should stop trying to block broad-based reforms intended to create a more solid financial system.