About Geese And Golden Eggs
Jeremy Hetherington-Gore Unleashed
23 March, 2009
'Those who cannot learn from history are doomed to repeat it,' said George Santayana, in another apposite quote, the history in this case being what happened to the US when it introduced a withholding tax in 1964 on interest payable on foreign bond market issues, something that immediately led to the creation of the 'Euromarkets', now a trillion dollar business firmly resident in London that entirely cuts out the US capital markets.
In fact, the Euromarkets debacle didn't harm the 'Masters of the Universe' as they came to be called, the mostly US-owned investment banks which grew fat on the proceeds of international capital markets - it just meant that the 60-storey skyscrapers they inhabit with their thousands of free-spending young merchant bankers came to be built in Canary Wharf and Frankfurt instead of in Manhattan. And that's what will be the outcome of the Congress's futile attempt to control the law of supply and demand on Wall Street (to subvert human nature, in other words).
No doubt some of the more senior executives who will be punished by this measure bear some responsibility for the collapse of the banking sector; but the bulk of those who will suffer are just those experienced, clever traders and managers who have been making their firms a lot of money for the last ten years, and in many cases still are. In what sense are they to blame for what has happened? They will either immediately jump ship, leaving their already reeling employers, now partly owned by Uncle Sam, to fall even further into debt as the dross that remains sets about mismanaging them in cahoots with arrogant, ignorant politicians and overwhelmed Treasury officials; or they will turn to ever more elaborate reward schemes designed (at great expense, by tax lawyers) to circumvent the rules. A whole new tax avoidance industry will spring up overnight.
Of course the whole thing is mostly grandstanding by Democrats, who are flexing their muscles after eight years of frustration in opposition; but that doesn't make it any less dangerous. And what about all those Republicans in the House who voted for the legislation? They haven't even got the excuse of an upcoming election to justify their shameless behaviour. Ridiculous, indeed.
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