Summary of Would Taxing Banks Really Make the Banking System Safer?

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Would Taxing Banks Really Make the Banking System Safer? summary
A tax on bank lending could have adverse side effects. There is a better way.

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Economics professor David VanHoose puts forward a vigorous argument against using taxes to control bank behavior and protect the banking system from future shocks. He contends that such measures would prove ineffective in real-world banking. Though some of VanHoose’s assumptions will meet with opposition, getAbstract believes his ideas will trigger discussions on banking tax among finance professionals, regulators and government policy makers.

In this summary, you will learn

  • Why some economists propose using a new tax to curb certain banking behaviors
  • What adverse consequences that tax would have for banks and the banking system
  • What alternative approach offers a more viable solution
 

Summary

Some economists propose that taxing banks will coax them away from the kinds of risky lending behaviors that contributed to the 2007-2009 crisis, repair “negative externalities” to the banking system and force banks to act in the best interests of the system rather than in their own interests. But this...
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About the Author

David VanHoose is an economics professor at the Hankamer School of Business at Baylor University.


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