The G20 meetings look to be a barnburner:
[W]hile Ottawa supported the process to ask for the IMF study, the government is rejecting the results - in stronger language than ever.
"We believe that Canadian taxpayers should not bear the costs of bailouts of financial institutions in other countries," Flaherty told a Toronto financial conference, a day before heading to Washington to make the same argument to his international colleagues.
I can't see why Flaherty should back down.
We should probably start by dispensing with arguments to the effect that "Banks are bad, so we must tax them." This is, as the saying goes, not even wrong. Even if your hatred for banks burns with a pure, hard flame, you will never be able to force a bank to pay the tax - because banks are not people. Indeed, Canadian banks are an excellent example of the standard story of the incidence of corporate taxes. There cannot be a sentient Canadian who doubts the ability of our banks to push costs off to their workers and customers. Banks wouldn't be paying the tax; we would.
And for what? The idea seems to be to create some sort of global fund to pay for bailouts in the event of a future financial crisis. A bank bailout insurance policy for governments, if you will. Is this a good idea for Canada? At first glance, the case for participating seems weak: our banks just went through a pretty severe stress test without requiring a bailout.
The case doesn't get seem to get stronger when you look more closely. Stephen Williamson has a couple of very nice recent posts comparing the Canadian and US banking systems, here and here. One of the points he makes is that Canadian banks are "essentially self-insured" already - largely at the behest of Canadian regulators.
So what exactly would we be buying? It looks to me as though Flaherty's interpretation is the correct one: we'd be paying for bailouts of banks in other countries.
Stephen Williamson makes this comment:
Part of the conventional view of this historical experience is that there is something inherently wrong with banking - in converting illiquid assets into liquid liabilities banks leave themselves open to runs and panics. A Canadian perspective on this might be entirely different. A Canadian might look at US banking history and wonder why these Americans can never get it right.
There may be financial reforms that Canada should adopt in the light of recent experience. The bank tax doesn't seem to be one of them.