The Treasury secretary, Timothy Geithner, has an op-ed in today's Washington Post: "Our latest estimate conservatively puts the cost of TARP at $117 billion, and if Congress adopts the Financial Crisis Responsibility Fee that the president proposed in January, the cost to American taxpayers will be zero."
Who does Mr. Geithner think it is who will be paying this "Financial Crisis Responsibility Fee"? Do the owners of financial instititions who would be subject to this "fee" -- a polite word for what is actually arguably not a fee but a tax -- not count as American taxpayers?
Also of interest in Mr. Geithner's article: "Importantly, with the Senate bill, the United States would have a strong hand in negotiating a global agreement on new capital requirements by the end of the year. Such an agreement would establish a level playing field with minimum requirements for capital." So much for allowing jurisdictions to compete by creating regulatory environments that are attractive for businesses, which, depending on how you see it, is either a race to the top, a race to the bottom, or a "laboratory of countries" akin to the "laboratory of states." If Mr. Geithner thinks these capital requirements are so desirable, wouldn't it be to America's advantage to impose them and and not have the other countries do so? After all, by the Blankfein-Cohn Principle, bankers will be more eager to trade with counterparties that are subject to tougher capital requirements.
If the real issue is systemic risk, having different countries with different standards might actually be less risky than having one uniform global standard. If there's a global standard and it is wrong, then the whole world's economy could crater. But if one country gets it wrong, then other countries with better rules might not be hurt as badly. I realize the global economy is interconnected and capital is mobile. But global capital requirements come with risks as well as the advantages that Mr. Geithner touts.