But to my knowledge, no one has really made this point since the chart has circulated widely. Certainly no one has tried to illustrate it.

Maybe people just lack my whiz-bang PowerPoint and Excel skills, or maybe I’ve actually had an Original Thought. But take a look at the chart I created, which overlays a trend line showing the share of income received by the top one percent (the black line) on top of the Philippon-Reshef chart. The trend line comes from the widely cited work of economists Thomas Piketty and Emmanuel Saez, who used IRS data to look at the incomes of the very rich:

I’ve argued before that I think the Piketty-Saez top-share trend line overstates the recent rise in income inequality, but I don’t see much reason to doubt the basic U-shape of the trend since the Great Depression. For all of the consensus around the basic inequality trend, there’s surprisingly little agreement or understanding as to why it looks the way it does (a major theme of Paul Krugman’s Conscience of a Liberal). Could it really be as simple as the extent of financial regulation? Every analyst bone in my body says this is too easy, but…but….

Of course, saying it’s all financial regulation trends isn’t necessarily inconsistent with Krugman-esque arguments that it’s all about changes in cultural acceptance of inequality.  Maybe financial regulation flows from public attitudes about inequality.

Anyway, interesting — no?

As it turns out, job creation in the American economy comes disproportionately from new and young companies. Sluggish economic times, moreover, can be the cradle of entrepreneurship: Over half of the companies on the Fortune 500 were founded during a recession or bear market. Entrepreneurs are also responsible for introducing a large share of innovations that improve our standard of living.

One would think, then, that the conditions for job creation would be obvious: Avoid steps that would discourage new companies from starting and that would make it as difficult as possible for them to grow. But alas, one would be wrong. In recent weeks, we have seen signs that policy-makers and legislators still have no clue how to solve the jobs dilemma.

An Assault on Startups?

First, Bloomberg BusinessWeek reported last week that the Internal Revenue Service (IRS) is targeting the use of freelancers and “perma-temps” by many firms. At issue is the classification as freelancers of workers who remain on a company’s payroll months and even years, a violation of the tax code. Because such workers offer flexibility and help reduce costs, many companies that use them are young and small. As Nick Schulz pointed out, this “assault” on voluntary work arrangements might not be the best idea when we’re interested in encouraging job creation.

Data from the Census Bureau and Bureau of Labor Statistics indicate that the average size of new firms has been shrinking by about one or two employees for several years. On one hand, that’s a potentially worrisome trend as it suggests a Red Queen effect whereby we need to start more and more new companies just to generate a steady level of jobs. On the other hand, as the BusinessWeek story pointed out, this trend also indicates that more new and young companies are using flexible employment — freelancers, independent contractors, temporary workers — as a way to help boost their chances of survival and growth.

Just last week the CEO of a young firm explained to me how he and his co-founder opened up their office space some time ago to anyone who wanted to come in and write software for them on a temporary basis. Some of those who did became full-time employees, while others ended up starting their own companies in the same office. It’s difficult to predict what effect the IRS action will have on new and young companies, but it seems safe to say that it won’t be the job creation elixir for which policy-makers are searching.

Another recent, admittedly less worrisome development was the appearance in the financial reform bill of some provisions that likely would have suppressed startup activity. One provision required startups that raised funding to register with the Securities and Exchange Commission and then wait four months for review. Another hiked the monetary thresholds for “angel investors” — wealthy individuals who play an increasingly important role in financing new companies — which could have worked to prohibit much startup financing.

The anti-startup and anti-angel provisions have since been watered down, but remain testaments to how easily and quietly we might kill the golden goose in this country. Who sits down and asks, How can I depress entrepreneurship today?

Entrepreneurship Essential to Any Recovery

These recent episodes take place against a backdrop of an apparently anti-startup zeitgeist taking shape. An impressionistic gaze at the landscape reveals an increasing tendency for policy-makers to focus on things large and well-established, even as our economy and society are driven more and more by the new and small.

One indication of this is well-known: The rush to bail out some of the biggest and oldest companies in the economy sent the wrong message to potential entrepreneurs. There was a compelling rationale to the actions to save General Motors and Chrysler, just as there was one to pour money into banks and other financial institutions. But the composite signal was perverse: bigger and older are better. The largest banks in the country now have a bigger market share than they did prior to the recession, and these aren’t necessarily the primary sources of financing for new and young businesses. The zeitgeist was expressed quite succinctly in the BusinessWeek story: “It’s easier and quicker to audit smaller businesses.” So there you go — ease trumps dynamism.

New companies and the jobs and innovations they generate are not silver-bullet solutions. Yet economic recovery surely won’t happen, or be as strong, without them. Entrepreneurship in the U.S. has been remarkably resilient for about 30 years, with a surprisingly steady level and rate of firm formation. While encouraging the formation and growth of more startups is clearly something that would boost economic growth, it’s not entirely clear how we might go about doing that. What is crystal clear, however, is that we could very well succeed in killing entrepreneurship if we don’t pay attention to what goes on in Washington.

This doctrine is predicated on the idea that Barack Obama, elected with nearly 53 percent of the vote, is a dangerous radical bent on extinguishing American liberties and importing Euro-style social democracy. It’s an idea so crazy on its face that many progressives are convinced that racism must lurk behind it.

Maybe, but some conservatives also convinced themselves that Bill Clinton maintained a secret airport in Arkansas to import narcotics from Central America. The right’s feral attacks on Clinton led a sympathetic Toni Morrison to dub him in a figurative sense “America’s first black president.”

Whether or not race is a factor, Republicans have evidently calculated that there is no political cost in withholding cooperation from Obama, at least on domestic issues. That may have been true of health care, which lost public support as the debate wore on. But fixing Wall Street is another matter.

The Pew Center for Research reported yesterday that Americans overwhelmingly favor (by 61-31) reform of financial rules, even as they evince growing skepticism of government activism. It’s pretty clear the public takes a “never again” stance toward bailing out Wall Street bankers, speculators and bonus babies.

That’s why Mitch McConnell, the GOP Senate leader, latched onto the theme that the bill crafted by Sen. Chris Dodd (D-CT) would actually make future bailouts more likely. President Obama blasted that “cynical and deceptive assertion” over the weekend, and McConnell yesterday seemed to back down.

Still, Democrats need Republican votes to bring a bill to the floor. The Washington Post reports this morning that Democrats are targeting Sens. Olympia Snowe and Susan Collins of Maine and Bob Corker of Tennessee. Bucking his party’s sullenly oppositionist temper, Corker has worked constructively with Sen. Mark Warner (D-VA) to offer sensible improvements to the Dodd bill.

That bill is snagged on GOP opposition to a new regulatory body, to be independent but lodged in the Federal Reserve, that would protect consumers of credit cards, mortgages and other loans from deceptive or predatory practices. Dodd has signaled a willingness to compromise on another controversial provision, an industry-financed $50 billion fund to liquidate bankrupt firms. And the New York Times reports today financial sector lobbyists have lavished contributions on members of the Agriculture Committee, which is grappling with a key provision to regulate derivatives.

During the health care debate, Republicans did not appear to be moved by the plight of Americans with no medical insurance. But financial reform involves something Republicans traditionally care deeply about – money. Where are the sobersided conservatives of yesteryear, who understood that the safety and soundness of our financial system is fundamental to America’s economic health? Striking the right balance between regulation and innovation, security and risk, is an urgent national priority that ought to engage responsible leaders in both parties.

If Republicans aren’t willing to set aside reflexive partisanship long enough to stand up for American capitalism, we really are in a world of political hurt.

Photo credit: http://www.flickr.com/photos/epicharmus/ / CC BY 2.0

“I couldn’t support the bill in its current form,” Mr. Corker said in an interview with The Wall Street Journal. “I am absolutely not throwing in the towel. I have no plans to support the current legislation. I hope we’ll get back to the negotiating table.”

This is, of course, a familiar tactic. After a year of being actively courted by the administration and Democrats, congressional Republicans claimed they couldn’t support health care reform, but were willing to stall further by espousing an interest in negotiating. But despite Corker’s backing away from a bill that as recently a last week he said he thought was going to pass, it’s worth sticking to the principle of a bill with bipartisan ideas.

The big idea that Warner and Corker worked on was including an autonomous Consumer Financial Protection Agency (CFPA) as part of the Federal Reserve System. While sticking the CFPA in the Fed is an ungainly solution, it does have the benefit of giving the CFPA start-up funding through the Fed’s balance sheet. Additionally, creating a brand-new agency out of the parts of others does have the chance of echoing the struggles the Department of Homeland Security had getting off the ground, a fate a Fed-housed CFPA can avoid.

Senate Democrats shouldn’t bend over backwards and try to pass a flawed bill in the hopes of convincing Republicans to get on board. But neither should they give up on looking for broad-based support for meaningful reform.

A robust Consumer Financial Protection Agency (CFPA) is vital. Concerns over creating a whole new bureaucracy have to be balanced against developing a consumer watchdog agency that has teeth to rein in subprime mortgages, hidden banking fees and the like. I got to hear Sen. Mark Warner (D-VA) talk about this with Sen. Bob Corker (R-TN) at a panel sponsored by the National Journal, where they described striking that balance by housing the CFPA in the Fed. The new autonomous agency would get Fed funding for its activities but would not fall under its oversight. That responsibility would fall on a CFPA director appointed by the president and confirmed by the Senate. This should give it enough independence from the financial institutions that fund the Fed to make the agency a real force for protecting consumers.

However, as described in the bill, the CFPA would exempt some lenders from oversight. An improvement would be to follow President Obama’s lead and create a CFPA that covers retail activities from all financial entities, including small banks, auto loan and mortgage originators (like Countrywide or GMAC), and payday lenders. The Department of Defense got military personnel protected from such lenders four years ago, finding that such loans “undermine military readiness, harm the morale of troops and their families, and add to the cost of fielding an all-volunteer fighting force.”

The Dodd bill includes the so-called Volcker rule, limiting the scope of bank activity, which I’ve argued before won’t make a real difference in prop trading, as banks can mask it behind market-making and client trading. However, the excess leverage tax in the Volcker rule — if properly beefed up — will discourage firms from becoming Too Big Too Fail (TBTF). And where the bill as envisioned doesn’t seem to rein in behemoths like Citi or Bank of America, increasing the capital requirements on overly large firms is a relatively easy fix, if the political pressure from bank lobbyists can be overcome.

The bill looks to wind down TBTF through a special financial panel of bankruptcy court, which would allow systemic risk overseers — envisioned in the bill as comprised of representatives from Treasury, the Fed and the CFPA — to take vulnerable firms into receivership and liquidation in times of crisis. The FDIC would manage a $50 billion fund that banks would pay into to provide liquidity in these situations. As envisioned, the treasury secretary petitions the court, the financial firm in question responds, and the court has 24 hours to decide. But a decision can be appealed to a Court of Appeal and then the Supreme Court, a process that could take up to 30 days. In a financial era in which multibillion dollar institutions like Merrill Lynch and Lehman Brothers can evaporate over the course of a weekend, giving management 30 days in which to stonewall means that an orderly wind-down as the new rule envisions is unlikely.

We’re waiting to see what will come from Sens. Jack Reed (D-RI) and Judd Gregg (R-NH) on derivatives, but the existing language encourages increased transparency and centralized clearing for standardized derivatives (the maligned CDS’s and the like) and increases margin requirements for non-standard derivatives. All trades being reported will help regulators understand the evolution of the financial system better.

The inclusion of a non-binding shareholder vote on executive pay will give shareholders a greater role in compensation. While it won’t solve the “heads I win, tails you lose” problem of Wall Street’s bonus structure, it will give outsiders more say on pay and hopefully check the worst excesses.

Like the CFPA and the chairman of the Fed, the proposed legislation would also make the New York Fed presidency a White House appointment. That role, which was vital at the height of the 2008 crisis when now-Treasury Secretary Tim Geithner held it, and was central in previous crises, like the LTCM meltdown of 1998, has long been seen as beholden to Wall Street. A presidential appointment would increase its independence form investment banks.

As presented, the Dodd bill has its flaws — in addition to the ones mentioned above, others have argued that political realities have compromised the force of the bill, and because it hasn’t addressed leverage, the seeds of an asset-bubble-driven crisis like the most recent one are still there. It’s true, as Sen. Dodd said when he announced the bill: “This legislation will not stop the next crisis from coming. No legislation can…” But this bill — with improvements — can give regulators the tools they need to address future crises in a more proactive manner.

Our friend Bob Litan has a new report out from the Brookings Institution on the benefits from financial innovation over the past thirty years. The report is worth reading in full, but a quick summary of his findings is found in a chart at the beginning of the paper (condensed into one image by Kevin Drum):

Given attitudes like Volcker’s, it might be surprising to see so many “+”s, connoting relative benefits, relative to “-”s, connoting developments that did not improve that part of the economy. (“0″ indicates the innovation was a wash.) But that is the reality of innovative financial instruments — they are, by and large, designed to be beneficial, but unmonitored can cause more harm than good. Innovations like credit scoring, collateralized debt obligations (CDOs), and inflation-protected Treasury bonds (TIPS) — all were developed since Volcker was Fed chair. But the benefits from these innovations (increased access to credit, which allows for consumption smoothing) can also lead to abuses of the system (crushing credit card debt, NINA mortgages, balloon payment mortgages) and asset bubbles. These abuses can be swept under the rug if the underlying assets in a CDO are not transparent, and that CDO is sold to an unsuspecting client by an investment bank trading desk.

The status quo is unsustainable, but attempts to ban some of these activities are problematic as well. Proclamations like the Volcker rule – limiting the scope of bank activity — are either too tightly defined to be effective or are so broad they throw out the above benefits with the bathwater. What would be better is to provide transparency in these activities — through clearing credit default swaps (CDS) and other derivatives on exchanges, providing credit terms in an easily understood manner upfront, and eliminating hidden fees — so that all involved know what they are getting into.

Litan also points out one key fact at the end of his paper: we’re not done with financial innovation. He argues that despite the headlines, not all innovation is bad, and there is more to come. He cites the work of Robert Schiller, the Yale professor who has pioneered work in housing price markets — designed to give homeowners protection they currently don’t have against a fall in the value of their home — and counter-cyclical tax policy, as an obvious source of financial innovation that is for the good.

But Litan concludes by noting that the market — not government — will continue to drive innovation, but “policymakers must be better prepared in the future than they were before the financial crisis to step in — first with disclosure standards and possibly later with more prescriptive rules” to prevent crises like the most recent one from happening again. The one area where he sees a more active government role is in consumer finance, an area in which a robust Consumer Financial Protection Agency will be key.

For many on the left, the near-collapse of America’s financial system during the winter of 2008-2009 was irrefutable proof of the failure of free market ideas. The new consensus — let’s call it the anti-Washington consensus — was solemnized by business and political elites in Davos last month. Fittingly enough, French President Nicolas Sarkozy delivered the eulogy for neoliberalism.

The Anglo-American model is dead. Long live state capitalism!

Not so fast. In America at least, popular attitudes have not lurched in a more interventionist or social democratic direction. If anything, there’s been a backlash against the emergency measures the Obama administration has undertaken to unlock credit, bail out big banks holding worthless securities, reduce home foreclosures, and keep big U.S. auto companies afloat.

That has perplexed and frustrated Democrats, who believe the government should get more credit for again saving capitalism from the capitalists, just as it did in Franklin Roosevelt’s day. But Wall Street’s fall from grace doesn’t automatically translate into rising public receptivity to a more active state. Anti-business and anti-government attitudes can and do co-exist easily in the American mind.

President Obama maintains, quite plausibly, that Washington’s decisive intervention kept the economy from tumbling into the abyss. But unprecedented public deficits, the government’s effective takeover of large finance and auto companies, and, yes, Obama’s push for comprehensive health care reform, also seem to have resurrected old fears about “big government.”

One likely reason is the sheer, pharaonic scale of government spending to rescue the economy: nearly $4 trillion when you add the Federal Reserve’s efforts to pump liquidity into financial markets, aid for failing banks, last year’s $787 billion “stimulus” plan, and another $100 billion jobs bill for this year. And many in middle America are barking mad that political elites have used tax dollars to shield economic elites from the consequences of their own greed and ineptitude. This is especially true of the independent voters who helped Obama to win a solid majority in 2008, but whose defection over the past year has fueled Republican victories in elections in Virginia, New Jersey, and, most shockingly, the liberal bastion of Massachusetts.

Meanwhile, the U.S. economy is growing again, by a gaudy 5.7 percent of GDP in the last quarter of 2009. There’s been little crowing at the White House, however, not when many small businesses still can’t get credit, people continue to lose their homes, and unemployment remains stuck in double digits.

For Obama and the Democrats, the central economic challenge is not to sell some new model of state-managed capitalism to a public already worried about government spending and overreach. It’s to rebuild the American economy’s capacities for brisk innovation and job creation. That will require striking a careful balance between new regulation and entrepreneurial risk-taking.

With Wall Street again reaping huge profits (and dishing out fat bonuses), some sort of financial regulation likely will pass soon. The key tasks here are reducing moral hazard by ensuring that no financial institution becomes too big or interconnected to fail, raising capital requirements to curb excessively leveraged speculation, and creating transparency in the trading of exotic financial products like derivatives.

But what the country needs even more is a progressive opportunity agenda that emphasizes technological innovation, small business creation, American competitiveness, fiscal discipline, better schools, and middle-class jobs. Such an agenda would include the following elements:

An aggressive infrastructure initiative. Washington must reverse decades of neglect and double or triple spending aimed at modernizing America’s aging and inadequate public infrastructure. Even that, however, won’t be nearly enough, which is why progressives are calling for a National Infrastructure Bank to leverage private investment in high-speed rail, intelligent transportation systems, a smart electricity grid, and next-generation broadband.

A big boost for clean and efficient energy. The United States needs to put a price on carbon, which would raise billions to invest in developing clean fuels and technologies. Unfortunately, Obama’s “cap and trade” proposal is languishing in Congress, a victim of Republican obscurantism on climate change.

More exports. Obama wants to double U.S. exports, but the White House has not pushed Congress hard to pass the U.S.-Korea trade pact. Nor has it confronted China and other Asian nations whose currency manipulations keep U.S. (and European) goods at a competitive disadvantaged.

Fiscal restraint. America’s heavy borrowing from abroad weakens the dollar and deepens our reliance on foreign creditors. To maintain the nation’s fiscal integrity and independence, Obama must walk a fine line between winding down our enormous public deficits and debts and continuing to pump up domestic demand. The key is to reduce the unsustainable growth of public health care costs, which is why Obama is right not to give up on health care reform this year.

An entrepreneurial climate. Over the last three decades, firms less than five years old have accounted for nearly all net job creation in the United States. U.S. progressives should embrace policies that foster innovation and entrepreneurship: more public spending on research, a light-handed approach to regulating and taxing new enterprises, fiscal discipline to keep capital costs low, dramatic improvements in education and preferences for skilled immigrants.

In the ideological hothouse of Washington, it’s natural for Democrats to argue that the financial crisis has discredited market fundamentalism. But the antidote isn’t more government, it’s a progressive model for innovation-led growth that champions individual enterprise and middle class aspiration.

With unemployment at 10 percent and Wall Street banks handing out record bonuses (Goldman Sachs’ bonuses are reported to match 2007’s record levels), and pundits reading doom for the administration in the tea leaves of the Massachusetts election, the political temptation to go populist would be strong. But Obama decided instead to reassert his progressive program for addressing the economy. Obama highlighted not grand industrial policy, but accomplishments that have helped the American people face a truly global recession. The stimulus bill helped us avoid falling off the economic precipice, and unemployment protection and COBRA extensions make a meaningful difference to people looking for work in a changing economy.

Obama’s call to Democrats to not “run for the hills” on issues such as health care suggests that the talk of that reform’s demise was premature. The embrace of centrist – and even Republican – proposals on energy, including nuclear power and offshore drilling, might offer some hope on a climate change bill making it’s way through the Senate. But until politicians spell out what sacrifices will come with addressing climate change, it may be a campaign promise that remains unfulfilled.

Disappointingly, the president soft-pedalled trade and immigration priorities. While they were mentioned, it’s notable that the president didn’t call on Congress to pass free trade agreements with South Korea, Panama and Colombia. And the reference to the Doha global trade round and immigration reform were pro forma at best, not promising any results.

Obama was laying the foundation for significant payoff from his education initiatives, however. Student loan subsidies to banks are an easily overlooked handout to Wall Street that the president was smart to put an end to. The investment in K-12 education reform, community colleges, and Pell grants will help prepare the next generation of Americans for the 21^st-century economy. Incentives for debt forgiveness for public sector workers will mean that our best and brightest — who go to very expensive colleges and graduate schools — can now afford to look at public service, and can be used to limit some of the demand for a revolving door between the public and private sectors.

The president didn’t break new ground, or lay out a visionary mandate for change. But he reassured us that he was going to govern as he was elected, looking for progressive solutions to the challenges the country faces.

One last point — at last week’s “banking limits” announcement, beltway Kremlinologists were reading volumes into the fact that Treasury Secretary Tim Geithner was off to one side, while presidential economic adviser Paul Volcker was front and center. (Simon Johnson said: “Where you stand at major White House announcements is never an accident.”) Last night was Geithner’s chance to stand front-and-center — shoulder to shoulder with Bob Gates. With Larry Summers way off to the right — and I didn’t see Volcker in the audience — the handshake the president gave Geithner on his way in would seem to be sending the message that the secretary continues to be the president’s man.

Limit on Size – The good part is the limitation on the size of banks. This will include a tighter cap on the control of deposits. Currently no bank can control more than 10 percent of the nations deposits — but Bank of America got the Bush administration to waive that in 2007 to buy LaSalle. The administration’s proposal would have this cap include non-insured assets and other deposits. While this is a good first step, its effectiveness will be spelled out in the details. Bank of America is the only bank that exceeds the current cap, and almost 25 institutions could be considered “Too Big To Fail.”

Limit on Scope – At first blush, this seems to be a ban on banks taking FDIC-insured deposits – or having received TARP money – from engaging in proprietary trading. Prop trading is a major part of Wall Street activity, in which investment banks trade with “their own money.” That is, they engage in trading on their own behalf, not on the behalf of customers. The administration is right that a lot of this trading on prop desks is speculation. However, prop trading is also how investment banks and market makers engage in risk management and hedge positions. Banning prop trading by banks would severely curtail their market-making ability, and dry up liquidity on Wall Street faster than a sponge in the sun. Better than limiting the type of activity trading desks engage in would be to limit the amount of leverage they can use in that speculation.

The administration has said it is going to work with Congressional leaders in the coming weeks to spell this out in details. We’ll see if Congress is able to improve on these suggestions.

In the discussion of taxing banks and bankers, a couple of possibilities have been floated, some of which can reap short-term political points, others of which have the potential to promote progressive policies:

Bonus tax – One of the easiest – and politically most satisfying – would be a tax on excess bonuses. The British exercised this option on London bankers this past year. Bonuses in the City above a certain amount were taxed at a 50 percent rate. Banks responded by threatening to move offshore and – when that threat rang hollow – doubled the bonus pool they paid out to bankers. The end result was that the bankers whose decisions led in part to the crisis were financially unharmed, the British government raised a relative pittance in taxes, shareholders in City banks took a hit (as the bonus pools were increased at their expense), and the underlying fault lines in the British banking system remain unaddressed.

Transaction tax – The worst of the options would be a tax on transactions. As discussed before, this would merely pour sand in our financial system, breaking it and slowing economic recovery.

Excess profits tax – A more appealing option would be a tax on excess profits. A defining aspect of the financial bubble of the last decade was the fact that financial profits were 40 percent of overall corporate profits – more than double the slice financials made up of profits in the 1980s. A tax on these excess profits would rein that in. But while this could be useful, as Simon Johnson points out, it would be fairly easy to game, and end up being ineffective.

Tax on assets – A tax on bank assets above a certain amount addresses not just political sentiment that banks have made it through the crisis unscathed, but also the fact that banks are too big to fail. Encouraging banks to “right-size” themselves would make our economy safer from the systemic risk imposed by banks like Citigroup or Bank of America – which are debilitated but whose failure would be economically catastrophic.

Excess leverage tax – Taxing the leverage that financial institutions use to increase returns would allow us to avoid situations like that faced a year and a half ago when Lehman Brothers – leveraged over 30:1 – collapsed over the course of a weekend. It would make banks “safer” but would leave them still too big. In the event a bank were to fail, it would still be a systemic threat to our economy. This would be a more targeted version than an assets tax, but it would be harder to implement — definitions of leverage differ – and if not properly defined would leave hedge funds, insurance companies and other “non-bank financial institutions” untouched, leading to a crisis like that perpetuated by Long-Term Capital Management in 1998 or AIG last fall.

The taxes unveiled today are a very tentative step down the path towards an effective tax on assets. But the administration’s proposal is too broad – affected institutions could be as small as $50 billion — and too light to be effective.

If the Obama administration were strictly looking to tax the problem of an outsized and dangerous financial industry out of existence, a combination of the last two taxes — properly implemented to cover the whole financial sector when looking at leverage and focused on banks that are bigger than, say, $300 billion when looking at assets — would be the most effective. But hastily implemented, they could have unintended consequences, crippling our economy while merely pushing the problem offshore. Coordination with the EU and other G-20 countries will be vital to help with the de-leveraging of our economy.