He said governments should consider forcing banks to set up “insurance” schemes to cover the cost of possible future bail-outs. “If the authorities determined that a public equity injection was necessary in order to preserve stability, government could be authorised to provide the support, but with a right to claim back the eventual cost, if any, from an increased ‘insurance’ levy on the banking system over a period of years beginning after the crisis had clearly passed. Under that kind of regime, more of the cost of banking system failures could fall on the shareholders of banks generally rather than on the public purse.”
While Smart Taxes does not agree that an insurance scheme is the answer to this problem, preferring to know the extent of the liability upfront. We hope the floodgates continue to remain open as more and more commentators and decision makers subscribe to the view that those responsible for the crisis should be made to pay.
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