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Marketplace Scratch Pad

Brokeback Capitol Hill

Scott Jagow Jan 12, 2010

I’m guessing the tension at tomorrow’s Financial Crisis Inquiry Commission hearing will be sliceable. The government is more frustrated than ever with Wall Street’s lack of accountability, and the banks are clearly getting sick and tired of hearing about bonuses.

JP Morgan Chase CEO Jamie Dimon will be among the grilled tomorrow. At a speech yesterday, he said, quote:

“I am a little tired of the constant vilification of these people… This is not a casino.”

If Dimon means there are no green felt tables and poker chips at JP Morgan, perhaps. But the bank does take bets for clients. Just because they aren’t bets on the Dallas-Minnesota game doesn’t mean there isn’t a line or a house or a takeout. There is.

But unlike other casino-type operations, the government isn’t getting the cut it would prefer, considering the low-interest loans that made the past year’s Wall Street profits possible.

So, the president’s economic advisers are thinking up new ways to get their piece and discourage future reckless risk-taking. Presto — a new tax:

The administration previously rejected two ideas that have received much attention in recent months: a transaction tax on financial trades and a special tax on executives’ bonuses.

The most likely alternatives would be a tax based on the size and riskiness of an institution’s loans and other financial holdings, or a tax on profits.

Lobbyists for bankers, taken by surprise, immediately objected to any new tax. They said financial institutions had been repaying their portion of the bailout money in full, with interest…

“It is perplexing to us,” said Edward L. Yingling, president and chief executive of the American Bankers Association. He recalled that Mr. Obama recently had two White House meetings with bankers to urge them to provide more loans to credit-starved small businesses. But a tax, he said, would be “a hit on banks that will decrease their ability to lend.”

Like frustrated people in a relationship that’s gone sour, the government and Wall Street are exasperated. They took their relationship to a new level, and now they don’t know how to quit each other. To paraphrase Jack Twist: This is one helluva of an unsatisfactory situation.

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