Punishing the banks or the customers?

There was much in the news last week about President Obama's plan to tax the profits of banks in the US to make them pay for the bail out the taxpayer generously funded.

Labour have rejected this as not being something they want to undertake and the Conservatives have said they would consider it.

There is an interesting dividing line between the progressive approach of Obama and that of the Labour Government. Taxing the businesses, and their shareholders, is a very different thing from taxing the payroll. The level of bonuses being paid is obscene but it is a matter for shareholders to sort out the problems in heir own companies if they feel the level of remuneration is unreasonable. Whilst the Obama approach appears to be about debt recovery the Labour approach appears to be more about wealth envy. Ultimately the fear has to be that almost regardless of which approach is taken it is the poor customer that will bear the brunt of increased fees and interest rates. Even now it is somewhat galling that banks are charging something like eight times the bank base rate (0.5%) for a fixed rate mortgage when only this time two years ago the base rate was at 5.5% and mortgage rates could be fixed at 6 or 7%. The banks used the excuse that the problem was the inter-bank lending rate being so high, but that has now dramatically fallen to 0.60% so the excuse no longer exists for interest rates on mortgages to be so high.

It is pretty clear the banks need to start paying back what they owe the state but also need to start giving a fair deal to its customers.

Time for change.