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The Securities Industry and Financial Markets Association (SIFMA) today released the following statement from SIFMA President and CEO Tim Ryan in response to two proposals put forward by the International Monetary Fund (IMF) to tax financial institutions for future rescues and another based on profits and compensation.
“We all agree that the paramount reform for our financial system in the wake of the 2008 financial crisis is to put an end to ‘too big to fail.’ The IMF has worked very thoughtfully on addressing this issue, but in the end, they have endorsed policies that will tax the financial institution’s ability to contribute to economic growth and job creation through capital formation, which would be counter productive at a time of nascent economic recovery.
“We continue to believe that the best way to end the ‘too big to fail’ doctrine is through a tough, competent and accountable systemic risk supervisor and clear resolution authority that allows large or interconnected financial institutions to fail without causing significant disruptions to our financial markets. Imposing an arbitrary tax on firm profits and compensation would likely do little to reduce risk in the system, and would do more harm than good.
“At a time where credit availability is still scarce and financial institutions continue to recapitalize, instituting such a tax would certainly hinder financial institutions’ ability to finance business expansion, home, student, and car loans, and dampen job creation at exactly the wrong time. These taxes would also come at a time where the G20 is considering the impact of new capital and liquidity rules from Basel, which taken together would potentially stall economic growth.
“As the G20 meets later this week in Washington, we hope they will seriously consider the potential downsides to these policies in their overall efforts to address effective regulatory oversight of our global financial system.”
