Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • 2019 Federal Budget Analysis February 27, 2019
    Watch this space for response and analysis of the federal budget from CCPA staff and our Alternative Federal Budget partners. More information will be added as it is available. Commentary and Analysis  Aim high, spend low: Federal budget 2019 by David MacDonald (CCPA) Budget 2019 fiddles while climate crisis looms by Hadrian Mertins-Kirkwood (CCPA) Organizational Responses Canadian Centre for Policy […]
    Canadian Centre for Policy Alternatives
  • Boots Riley in Winnipeg May 11 February 22, 2019
    Founder of the political Hip-Hop group The Coup, Boots Riley is a musician, rapper, writer and activist, whose feature film directorial and screenwriting debut — 2018’s celebrated Sorry to Bother You — received the award for Best First Feature at the 2019 Independent Spirit Awards (amongst several other accolades and recognitions). "[A] reflection of the […]
    Canadian Centre for Policy Alternatives
  • CCPA-BC welcomes Emira Mears as new Associate Director February 11, 2019
    This week the Canadian Centre for Policy Alternatives – BC Office is pleased to welcome Emira Mears to our staff team as our newly appointed Associate Director. Emira is an accomplished communications professional, digital strategist and entrepreneur. Through her former company Raised Eyebrow, she has had the opportunity to work with many organizations in the […]
    Canadian Centre for Policy Alternatives
  • Study explores media coverage of pipeline controversies December 14, 2018
    Supporters of fossil fuel infrastructure projects position themselves as friends of working people, framing climate action as antithetical to the more immediately pressing need to protect oil and gas workers’ livelihoods. And as the latest report from the CCPA-BC and Corporate Mapping Project confirms, this framing has become dominant across the media landscape. Focusing on pipeline […]
    Canadian Centre for Policy Alternatives
  • Study highlights ‘uncomfortable truth’ about racism in the job market December 12, 2018
    "Racialized workers in Ontario are significantly more likely to be concentrated in low-wage jobs and face persistent unemployment and earnings gaps compared to white employees — pointing to the “uncomfortable truth” about racism in the job market, according to a new study." Read the Toronto Star's coverage of our updated colour-coded labour market report, released […]
    Canadian Centre for Policy Alternatives
Progressive Bloggers


Recent Blog Posts

Posts by Author

Recent Blog Comments

The Progressive Economics Forum

The Wall Street Journal wants a new tax on big financial institutions

The WSJ is concerned about the implicit subsidy provided to financial institutions that are “too big to fail”(TBTF). Given the obvious willingness of the US government to support Wall Street titans during the height of the financial crisis, the market is pricing in the expectation that the government stands behind those institutions regarded as TBTF. This implicit guarantee allows the TBTF firms to accesses funds more cheaply than those firms that are not regarded as systemically important. The WSJ attributes some of the eye-popping profitability of Goldman Sachs (which reported US $3.44 billion second quarter net income the other day) to this implicit government guarantee.  As the WSJ says: “So for the moment, Goldman Sachs – or should we say Goldie Mac – enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong. We like profits as much as the next capitalist. But when those profits are supported by government guarantees or insured deposits, taxpayers have a special interest in how companies conduct their business.”

One of WSJ’s proposed solutions is a bailout tax for those firms considered TBTF. If financial institutions are profiting from the market’s perception that they will get bailed out when times are tough, they should pay for the privilege.

This is an interesting line of thought here in Canada. Our major banks are clearly TBTF. And the market is clearly aware of the many interventions taken by the government to support the banking system last fall. Are the profits of Canadian banks supported by government intervention on their behalf when times are tough? Check out this pretty picture: following the various actions of the Bank of Canada and the Government of Canada during the height of the financial crisis last fall, conditions in the short term funding markets improved rapidly – especially in Canada (see Financial System Review, June 2009, Chart.  Chart 3 in the same publication shows just how dramatically the cost of term funding for Canadian banks has declined since the government lent a helping hand last fall.

Now that the WSJ recommends a special tax reflecting the implied government support for financial institutions, I can’t wait for the financial press in Canada to get onside!

Enjoy and share:

Write a comment

Related articles