OBAMA´S BANK LEVY : WHY NOW ? / THE WALL STREET JOUNAL ( RECOMMENDED READING )

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JANUARY 15, 2010, 8:11 A.M. ET.

Obama's Bank Levy: Why Now? .

By SIMON NIXON

One of the most puzzling aspects of U.S. President Barack Obama's proposed bank levy is why now?

It's a question that goes to the heart of the global response to the financial crisis. After all, it has been blindingly obvious for months that the government would need to respond to Wall Street's lack of self-restraint.

The banks paid out huge bonuses in both 2007 and 2008, even as the financial system was crumbling. Nothing was going to stop them paying out record bonuses this year when profits are booming on the back of ultra-cheap central bank money--money provided to recapitalize the banking system, not line the pockets of employees.

The economic and moral case for a windfall tax has long been unanswerable. The politics of the situation demanded nothing less. Yet despite so much time to prepare, this levy looks to have been cobbled together on the hoof.

Obama says he hopes other countries will now follow his lead. Yet he has spurned every opportunity to find a global solution to the bonus issue, including French President Nicolas Sarkozy's proposals for G-20 rules to redress the balance between bank employees, shareholders and taxpayers.

Nor did he support the U.K. and France when they introduced bank levies in December--a move that led Goldman Sachs, ironically one of the biggest targets of Obama's tax, to try publicly to intimidate the U.K. government with threats to shift businesses out of London.

Obama shouldn't be surprised if the U.K. now ignores his invitation to supplement its own one-off tax with the U.S. multiyear hit, hoping instead Obama's tax proves this crisis's equivalent of the Sarbanes-Oxley Act, which drove so much business London's way in the last decade.

So much for international cooperation.

What's worrying is that global agreement on a windfall tax on banks that pay out giant bonuses should have been the easiest part of the post-crisis response to achieve, given the political and fiscal pressures on all Western governments.

If the G-20 flunked this test, what hope for more contentious reforms? Already the project to create international accounting standards looks increasingly hopeless. Central banks and regulators meeting in Basel may have agreed on tough new rules on bank capital and liquidity, but governments are already under pressure from banks to water them down.

Besides, the U.S. never even implemented the previous rules. When banks have recovered from the shock of Obama's new tax, they can console themselves with the knowledge the world remains as fragmented as ever.

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