Dear Sirs, Martin Wolf ("Reform of regulation has to start by altering incentives", 24 June) makes a convincing case that it is necessary to change the system whereby financiers get to bet other people's money, keep a large part of the gains if things go well, and pass on a large part of the losses if they don't. The financial history of the 20th century suggests that there is some link between the frequency of banking crises and the marginal rate of taxation. High tax rates after WW2 were simultaneous with a period where banking crises were few, while economic growth was strong. In other words, hit the bankers where it actually matters: in their ability to actually keep for themselves the profits they can capture. Beyond making banking boring again, as prescribed, and having no impact on likely growth rates, this would have the additional advantage of providing a solution to the other big problem of the moment: public deficits.
Martin Wolf ("Reform of regulation has to start by altering incentives", 24 June) makes a convincing case that it is necessary to change the system whereby financiers get to bet other people's money, keep a large part of the gains if things go well, and pass on a large part of the losses if they don't. The financial history of the 20th century suggests that there is some link between the frequency of banking crises and the marginal rate of taxation. High tax rates after WW2 were simultaneous with a period where banking crises were few, while economic growth was strong. In other words, hit the bankers where it actually matters: in their ability to actually keep for themselves the profits they can capture.
Beyond making banking boring again, as prescribed, and having no impact on likely growth rates, this would have the additional advantage of providing a solution to the other big problem of the moment: public deficits.
Dear Sirs, Martin Wolf ("Reform of regulation has to start by altering incentives", 24 June) makes a convincing case that it is necessary to change the system whereby financiers get to bet other people's money, keep a large part of the gains if things go well, and pass on a large part of the losses if they don't. The financial history of the 20th century suggests that there is some link between the frequency of banking crises and the marginal rate of taxation. High tax rates after World War 2 were simultaneous with a period when banking crises were few, while economic growth was strong. In other words, hit the bankers where it matters: in their ability to actually keep for themselves the profits they can capture. Beyond making banking boring again, as prescribed, and having no impact on likely growth rates (despite self-interested claims to the contrary from predictable quarters), this would have the additional advantage of providing a solution to the other big problem of the moment: public deficits. Kind Regards,
Martin Wolf ("Reform of regulation has to start by altering incentives", 24 June) makes a convincing case that it is necessary to change the system whereby financiers get to bet other people's money, keep a large part of the gains if things go well, and pass on a large part of the losses if they don't. The financial history of the 20th century suggests that there is some link between the frequency of banking crises and the marginal rate of taxation. High tax rates after World War 2 were simultaneous with a period when banking crises were few, while economic growth was strong. In other words, hit the bankers where it matters: in their ability to actually keep for themselves the profits they can capture.
Beyond making banking boring again, as prescribed, and having no impact on likely growth rates (despite self-interested claims to the contrary from predictable quarters), this would have the additional advantage of providing a solution to the other big problem of the moment: public deficits.
Kind Regards,
