Not quite the point

Romney is right, of course, that "[t]he $2 billion J.P. Morgan lost means someone else gained.”  But that's not the point, if J.P. Morgan has at least implicit federal guarantees and would impose huge negative externalities on the U.S. and world economy if allowed to fail.

When you don't see a problem with markets when there are negative externalities and implicit guarantees, leaving you opposed to corrective regulation in circumstances where the likes of Paul Volcker support it, you are not really within the scope of conventional and defensible pro-market economic thinking.

Casebook update

The 16th edition of Bankman, Shaviro, and Stark, Federal Income Taxation, which I believe ranks # 2 in sales among basic income tax casebooks (but we try harder), should be available in print within a month or so.  Among other new features, it will have a website that we are hoping faculty who use the casebook will find very helpful.

Musical note

Lately I've been listening to two recently-released albums: the Magnetic Fields' "Love at the Bottom of the Sea," and the Shins' "Port of Morrow."  Often back-to-back, such as when I'm exercising.

"Love at the Bottom of the Sea" is truly brilliant, above all in its lyrics, although the music is quite enjoyable as well (and they work as a package together).  Songwriter Stephin Merritt has been called the Cole Porter of the rock era, and when he is at his best this is no overstatement.  "69 Love Songs," the 1999 triple album which pretty much is just what it sounds like from the title, is one of the towering achievements in pop music over the last few decades.  It's a consistently clever, delightfully conceptually brilliant, homage to, and subversion or deconstruction of, decades of love songs (not love itself) in popular music.

Since then, Merritt has experimented in a number of genres - like Alfred Hitchcock, he seems to enjoy self-imposed formal and technical challenges - with good results that were nonetheless generally below that of "69 Love Songs."

"Love at the Bottom of the Sea" could be called "15 More Love Songs."  While lacking the fresh conceptual excitement of "69 Love Songs," the songs are on average just as good, and perhaps better.  The lyrics range across the love song universe, frequently landing in territory that is distinctive to Merritt's dark but droll vision, and are just remarkably clever.

I saw the Magnetic Fields in concert early last month, and they played most of the new album, which I had purchased already but not yet heard.  The show was great fun, and the new songs were instantly memorable.  The group has evidently learned over time how to complement Merritt's personal glumness so that the show is lively and upbeat.

The Shins, like the Magnetic Fields, are less a band in the traditional collective sense than a vehicle for their songwriter (James Mercer).  "Port of Morrow" offers a principally sound- and melody-based, rather than lyrics-based, experience, and indeed the words sound worse than they actually are when I play it right after "Love at the Bottom of the Sea."  But it is a rich, lush, very enjoyable, great-sounding collection of catchy songs that invite repeat play.  Indeed, if you measure enjoyment based on the urge for repeat plays and the extent to which the songs stick in one's head, the two albums are essentially tied.

Excellent new book on progressive consumption taxation

I've long been partial to the David Bradford X-tax, a progressive consumption tax model that basically takes the flat tax (itself not actually flat, given the zero bracket alongside a positive one), and makes it more progressive by adding higher and more graduated rates. Bradford and his successors have also done a great deal of work in figuring out how this system, or an alternative progressive consumption tax design, could best be operationalized.

Early next month, but already available order for pre-order here, AEI scholar Alan Viard and Tax Foundation scholar Robert Carroll are publishing a book on the subject, entitled "Progressive Consumption Taxation: The X-Tax Revisited." This book does a great job of explaining both the rationale for enacting an X-tax, and how it might actually work.

In some other universe, or perhaps some other part of our universe, perhaps in the far end of the Gamma Quadrant, I would like to think that there is a world much like our own, except that enacting a progressive consumption tax is actually a feasible left-right compromise that one could imagine really happening. It truly has potential Clintonian Third Way merits, although it has never gotten very far politically. The left gets progressivity comparable to that under present law, but much more transparently and at a far lower efficiency cost. The right gets exemption for the part of capital income that it may be sensible to want to exempt that is, for the "normal" return to waiting. Everyone ought to be happy.

But here on planet Earth things took a very different turn, perhaps starting in the early 1990s. Plus, despite its considerable policy merits, the X-tax may somehow fail to be sufficiently salient and reasonable-looking to an ill-informed public. So I personally believe that it is not going anywhere, and I have not for several years devoted significant intellectual effort to examining or emphasizing it.

Still, this is an excellent book that deserves a wide readership. Special comment to readers on the left: however suspicious you might be of other publications emanating from AEI and/or the Tax Foundation, this is one that you should classify as straight-shooting and worthy of your time.

Upcoming Tax Policy Center on taxing Wall Street

On Friday, May 18, at the Urban Institute in Washington, D.C., I will be among the panelists in a public session, sponsored by the Tax Policy Center that is entitled "Making Wall Street Pay: The Pros and Cons of Financial Taxes." The session will start with lunch at 11:45 am and will then run from about 12:05 through 1:30. Urban is at 2100 M Street, but you can also stream the session in the comfort of your own computer.

The other participants will be Michael Keen from the International Monetary Fund, Steve Rosenthal from the Tax Policy Center, Lee Sheppard from Tax Notes, and Damon Silvers from the AFL-CIO. Fuller details regarding the event, including a description and links for either attending or streaming it, are available here.

The session should be fun and interesting. We will have lots of back-and-forth, rather than lengthy individual presentations, and there will also be a diversity of viewpoints. We will spend the most time discussing financial transactions taxes, as they are the closest to centerstage politically (especially in Europe), but we will also address financial activities taxes and risk-related bank levies.

People who are in Washington attending the National Tax Association's spring symposium may also find it easy to get away just for our session, a short Metro ride away from the NTA site.

Back in the game

Apologies for my near-radio silence in recent weeks. In addition to concluding my semester here at NYU Law School, I was involved in a confidential legal proceeding (not, however, as a party to the proceeding). This proved to be rather consuming of my time. But I am now done and have been decompressing for a week. I hope to resume posting regularly, and indeed have an immediate follow-up that I will give its own title.

Cover story

My article "The Financial Transactions Tax vs. the Financial Activities Tax," which appeared yesterday in Tax Notes, is actually the cover story, illustrated by an amusing faux boxing poster that shows a winning boxer, gloves held high, in between the title's two halves.

TV appearance (sort of)

On tonight's 9 pm NY 1 cable television show, "The Call," hosted by John Schiumo, I will be the first caller (though actually they are going to call me), discussing the so-called Buffett Rule. I call this merely "sort of" a TV appearance because only my smiling visage from an NYU publicity photo will actually appear on-screen.

UPDATE: Oops, false alarm. But it may still happen in a few days.

I'd say that I was ready for my close-up, but since they were going to use a publicity photo I suppose it's already been taken.

FURTHER UPDATE: What I was going to say was that the Buffett Rule is a dumb way of going about a good thing. One-track minds in politics will generally insist on rejecting one half of this statement or the other - emphasizing just the poor design and not the merits of the aim, or just the merits of the aim and not the poor design.

Tax policy colloquium on April 10, 2012 - Lane Kenworthy chapters from "Progress for the Poor"

This past Tuesday, Lane Kenworthy of the University of Arizona (Dep't of Sociology) presented some chapters from his book, Progress for the Poor. This was our yearly political scientist session - we try each year to have an accountant and a political scientist, and are also open to philosophers when someone has something suitable, in addition to inviting tax law professors (and others with public economics topics), tax practitioners, and economists.

The parts of the book that we discussed had three main theses. Here's a quick summary, including my main reactions as a reader:

Targeted versus universalistic aid to the poor - There's a long tradition arguing that the best way to help the poor is through "universal" programs such as Social Security. Wilbur Cohen, who helped design Social Security, famously said that a program for the poor will end up being a poor program. Hence, for example, in Social Security the transfers from high-earners to low-earners are smooshed in (that's a technical term) with the program's universal pension aspects, so that the redistributive part of what's going on will be less clear. Kenworthy finds the common assumptions behind universalism plausible in theory but not well-supported by cross-country data.

I'd say it's quite hard to know what to make of the cross-country data, as there as classification issues and so much is going on in each country. But I'd say that (a) the targeted versus universalist distinction is purely a matter of form, since it depends on how you define the program, (b) that's entirely consistent with the standard view, which is about optics rather than substance, and (c) the actual state of the optics seems to be that sometimes universalism fares better, other times targeting. For example, "targeted" welfare has prevailed in lieu of demogrants because it's targeted, and thus avoids the critique: "Why does Bill Gates need a demogrant?" (This critique ignores the economic equivalence of what's called a demogrant program to what's called a targeted welfare program if one treats the demogrant as taxable income and sets up the marginal rate structure the right way.) Given the context-specific optical tradeoff, it's even harder to draw general conclusions than it would otherwise be. I suspect we can't really draw confident general conclusions about how comparatively well "targeting" and "universalism" work in directing aid to the poor - it depends on the issue, the time, the society, and other aspects of the context.

The tax mix: does it matter? - The book notes standard views (from general debate, not the tax policy literature as such) regarding the relative vices and virtues of income taxes, consumption taxes, and payroll taxes. But cross-country data appears to undermine any claim of strong empirical relationships. I'd respond both that the cross-country data are hard to work with, and that all these tax bases are actually a lot more similar and overlapping than non-tax people often realize. Hence, the findings aren't a surprise to me even though I like to spend time thinking about the merits of different tax bases. A further point made by the paper, with which I certainly agree, is that, for aid to the poor, transfers / government services, etc. matter more than which tax system you use.

Are government spending and the size of government LESS different in the U.S. versus elsewhere than people commonly think? Clearly yes, if you count commonly listed tax expenditures as government spending. There are of course various issues in using the tax expenditure terminology that I have written about elsewhere. (E.g., if you treat tax-favored pensions as spending under an income tax but not a consumption tax that effectively provides the same tax treatment, you are relying on mere form to drive your adjusted "spending" measure.) But the big difference between the U.S. and, say, the countries in western Europe lies more in its having a less active "distributional" branch of government than in its having a smaller "allocative" branch.

Cleared for takeoff

My latest article, "The Financial Transactions Tax vs. the Financial Activities Tax," is ready to go (final proofs stage) and will indeed be appearing in Tax Notes on Monday, April 23.

Tax policy colloquium on 4/3/12 - Jon Bakija paper on income growth of top earners

Yesterday Jon Bakija of Williams College presented his co-authored paper, "Jobs and Income Growth of Top Earners and the Causes of Changing Income Inequality: Evidence from U.S. Tax Return Data."

The paper looks at an excellent set of 1979-2005 IRS tax return data that includes the self-reported professions and industry sectors of people with high taxable income, in order to shed light on where the rise in income inequality has been coming from. Unsurprisingly, it's mainly salary income, such as of CEOs and people in the financial industry.

Obviously, to the likes of us at the colloquium, the issues of particular interest include the tax policy implications, as well as what light the paper sheds on alternative explanations for rising U.S. income inequality. Globalization and technological change are weakened as explanations - at least, as exclusive ones - by divergence as between countries that one might think were relevantly similar. The U.S. has of course led the way in rising income inequality, with the U.K. being closer to us than anyone else. So other stories must presumably be playing a role, including the reduced influence of social norms in restraining high compensation and an increase in "tournaments" that have a big winner and lots of losers. Reduced marginal tax rates may have played a role as well - though partly just with respect to labeling, such as by encouraging the owners of closely held companies to use S corporations or at least pay out more salary to themselves - but appear to fall well short of serving as a plausible primary explanation.

For my money, one of the big tax policy implications is as follows. Both executive compensation and the rise of the financial industry - again, two huge contributors to the overall story - involve flawed markets in which we have reason to believe that high earnings often do not denote high social value or productivity. While it may be true that the pre-mega stock option corporate executives of the 1950s through the 1980s had at times too weak an incentive to seek greater profitability, it's clear (as Lucien Bebchuk and others have shown) that we have now a fundamentally flawed market, where the incentives are very strong, but misdirected given all the short-termist and other games that executives can and do play. Likewise, financial sector profitability to a large extent reflects bad incentives, whether to find the correct price one second before everyone else (leading to personal gain far in excess of the social gain) or to do the sorts of things that the Greg Smith op-ed talked about.

In principle, one would want to respond to these problems by addressing executive compensation and financial sector issues directly, rather than sweeping in all high-income people whether their income comes from this stuff or not. (Although there would still be further reasons for greater progressivity in light of the changing income distribution - for example, the equity gains from redistribution are greater when the top has pulled so far away from everyone else, and it's more efficient to tax income at high levels when there are lots of people SO wealthy that these taxes are inframarginal for them).

But if one can't respond directly to the governance and financial sector issues, then by raising marginal rates one is not entirely misdirected - they cover a lot of the waterfront here, even though not all of it. So I consider these problems, and the sort of information that the Bakija paper provides, as strengthening the case for higher marginal rates at or near the top.

Tax policy colloquium on 3/27/12 - Steve Shay paper on shifting to a territorial tax system

On Tuesday, Stephen Shay of Harvard Law School presented his paper (c0-authored with Clifton Fleming and Bob Peroni), Unpacking Territorial. It was an early draft that they rushed out for our convenience, so it isn't posted and hence no link here.

The article addresses the case for (and in particular against) having the US shift to a territorial system in which foreign source income is more or less (though not quite entirely) exempted. More particularly, it critiques the approach taken in the Camp bill, which attempted to be revenue-neutral (at least in the short term) and to address concerns about domestic base erosion that are important in any case but would be made even more pressing by the adoption of a more territorial set of rules.

I believe the paper scores some very powerful blows against the structure of the Camp bill, and shows that it would need substantial modification even assuming sympathy with the basic idea. But that critique should probably wait until the authors are far enough along to post their work, which I am sure they plan to do with all deliberate speed.

We used the occasion, however, to discuss both that critique and the underlying merits of a shift to exemption, since both are discussed at some length in the paper.

The following is a modestly amended version of the first half of the notes I prepared for the session, aimed at discussing the merits of territoriality versus present law.

(1) The case against exemption – If start with positive rate (say, 25% or 35%) for U.S. source income and zero for foreign source income (FSI), isn’t revenue-neutral lowering of the domestic rate + raising of the foreign rate likely to increase efficiency? Note that deadweight loss increases more than proportionately with the rate. National ownership neutrality (NON) as self-refuting re. the case for exemption; why seek distortion at one margin among many, rather than seeking to minimize overall distortion?

But even proponents of WW consolidation agree that the U.S. should impose a lower effective tax rate net of foreign tax credits (FTCs) on FSI than on domestic source income.
Suppose all foreign countries had a 20% rate, causing US companies that invested there to pay $15 of US tax on each $100 of earnings (assuming a 35% US rate and allowance of FTCs). WW proponents would be arguing for an effective US tax rate 18.75% (15/80) on after-foreign-tax earnings.

Given this example, is “double taxation” really the problem to be addressed in international taxation? E.g., suppose the US denied only allowed foreign taxes to be deducted, not credited, but lowered the tax rate for FSI to 10%. Then we apparently would be “double-taxing” FSI, yet the above company would only be paying $8, instead of $15, of US tax.

(2) Some dubious arguments against exemption

--Would reduced domestic investment be a first-order result of adopting exemption? – Depends on whether US multinationals face a fixed budget constraint despite access to world capital markets; why assume here that CEN, not CON, assumptions are correct?

--Why label territoriality a tax expenditure? Arithmetical equivalence to worldwide taxation plus specified “spending” proves nothing. After all, allowing business deductions is arithmetically equivalent to taxing gross income plus providing “spending” to replicate the lost tax benefits, but no one would say that this is a useful application of tax expenditure analysis. Need an agreed “normative tax base” (or at least treatment of a particular item) to make TE analysis potentially useful.

(3) Possible advantages of exemption (vs. present law)

--It repeals deferral (although so could a WW approach).

--It might improve repatriation incentives. Under the new view, the repatriation tax rate doesn’t have to be zero for deferral not to induce lockout – it just has to be constant over time. But the real issue here is repatriation tax rate volatility, which exemption might reduce.

--It replaces foreign tax credits with foreign tax deductibility (implicit under 0% tax on FSI, explicit with respect to foreign dividends under the Camp bill with its 5% rate), thus inducing US taxpayers to equate $1 of foreign tax liability with any other $1 cost or forgone income.

--Isn’t any system with deferral and foreign tax credits likely to have a horrible ratio of deadweight loss to US tax revenue collected? (Note that deadweight loss includes paying more foreign taxes by reason of the credit.)

--Of course, the tax rate on FSI need not be 0% (or 5%) to achieve these benefits.

--Adopting exemption would induce the accountants to change the “permanently reinvested earnings” rule that distorts behavior (in addition to being bad accounting). To be sure, one could address this rule directly without changing substantive US income tax law.

Act now while supplies last

My novel, Getting It, is now available on Amazon in a Kindle edition for only $3.99 (!). The link is here.

I've genuinely gotten great feedback from dozens of people who have read it. The only disconcerting element has been that they often say it was much better than they expected. Hmmm ... how well did they really know me ... what are they trying to say ...

Just one quote for now, from a review in the Above the Law blog a couple of years back:

"If you’re the type who is convinced that the people you work with in Biglaw are evil, conniving, and ready to stab you in the back with a really sharp highlighter, you will love Getting It, a novel by Daniel Shaviro. In a post titled 'james joyce meets the paper chase,' an Amazon reviewer says: 'If Joyce or Kafka had worked at Arnold and Porter, this would be their book.'

"I’ve read a lot of lawyer fiction, but never something quite like this. The satirical novel is populated with sadistic partners and scheming associates competing for partnership, including the caddish Bill Doberman, dopey Arnold Porter, and self-involved Lowell Stellworth. It’s an 'American Psycho' take on Biglaw — funny and fast-paced, a great summer quick read. I devoured it on a plane to Chicago."

Apologies to my long-time readers for recycling this quote. But in its own way Getting It is my favorite among all the things that I've written, so I naturally feel solicitous towards it.

C'mon, folks, only $3.99, and guaranteed to be more fun (plus better for you) than a comparably priced ice cream sundae.

Just asking

If the Supreme Court strikes down the healthcare law on the ground that the mandate was a "penalty" not a "tax," doesn't that mean Congress could enact exactly the same law the day after, throw in the word "tax" a couple of times without changing any substance, and it would be constitutional?

I am guessing that, if they do strike down the healthcare law, they will want to come as close as possible to the Bush v. Gore formula of trying to issue a one-off decision with zero precedential value. I doubt they'd have the nerve to state this expressly again. But given that many of the Republicans on the Court favor broad federal powers when they like what's happening (or who did it), why would they want to create any less flexibility for themselves the next time around?

Basing the reversal purely on word choice would have this desirable quality, from their perspective, by offering a roadmap that could be used to prevent the decision from serving as a significant precedent.

Video link in which I discuss my forthcoming paper on taxing financial institutions

The NYU Law School periodically posts video links in which faculty members discuss some aspect of their recent scholarship or scholarly interests. Just posted is a 3-1/2 minute piece in which I discuss my recently posted and soon to be published article concerning new taxes on financial institutions. You can find the link here; it's currently the first item at the top of the page, but as new videos are posted it will migrate downwards.

Unlike Twist and Shout, which the Beatles did live in the studio in one take, I needed a second take (with a few false starts in between) to get to the final version. Not sure mine came out quite as well, but then again they had been playing it live for years, whereas I was in effect jamming.

Tax policy colloquium on 3/20/12 - Susan Morse's paper on the "corporate offshore excise tax"

This past Tuesday, Susan Morse appeared at our colloquium to discuss her paper draft, "International Corporate Tax Reform and a Corporate Offshore Excise Tax."

The paper concerns the idea, which I have been floating for some time and which appeared in the international and corporate tax reform proposal disseminated by Ways and Means Chairman Camp, of addressing the windfall gain that U.S. companies would enjoy with respect to existing foreign earnings that have not yet been repatriated if the U.S. shifted to an exemption system for foreign source income. While one can (and I have) said a lot more about this idea, and its pluses and minuses, the core idea is as follows: U.S. companies have apparently racked up about $2 trillion in foreign earnings under the current U.S. international tax regime. Collection of the tax has merely been deferred until the income is repatriated. Why should this expected tax be reset to zero, just because we decide to adopt a new regime prospectively?

Among the proposal's advantages is that, if anticipated, it would reduce pre-enactment lock-in of U.S. companies' foreign earnings. The CFO of a given U.S. company would feel really stupid if the company ended up paying a repatriation tax that could have been avoided by waiting for exemption to be enacted. But if a transition tax would be waiting for the earnings anyway, then perhaps no reason not to repatriate earnings today (depending, of course, on how the tax would work).

I felt the paper was a bit too cautious in suggesting that perhaps the COET tax rate shouldn't be higher than the 5.25% "tax holiday" rate that companies handed themselves (via their legislative influence) a few years back. But why would one ever accept a self-serving "opening offer"? I could certainly see arguments for a full 35% rate (offset by the cash-out, to zero on this tax but not below, of foreign tax credits), even if the domestic rate simultaneously declines to 25%. After all, that new lower rate is itself a transition windfall for earnings that are realized under the new system but reflect decisions that were made under the old one.

I'd also note that:

(a) even if companies figured they might never repatriate and pay the 35% tax, they wouldn't have strong grounds for viewing themselves as ex post expropriated if the U.S. simply made indefinite continuation of deferral harder to sustain,

(b) we can monetize into the tax rate the present value of the deadweight loss that companies would avoid through the elimination of the repatriation tax, without making the firms worse-off than under present law.

A further issue presented by the paper is: 35% (or 5.25%) of what? The obvious tax base here would be the earnings and profits (E&P) of US companies' controlled foreign subsidiaries, grossed-up by foreign taxes paid if the credit is being allowed. The paper suggests using instead the accounting measure of permanently reinvested earnings (PREs), or those which the companies swore to the accountants would never ever ever be brought home. While I actually like the idea (which most accountants, I'm sure, would hate) of penalizing after-the-fact the use of this accounting technique, I'm not at this point persuaded that there are good grounds for not simply using the familiar tax concept of E&P.

One last and somewhat frivolous note: in the interests of catchiness, I would propose taking the COET (for "Corporate Offshore Excise Tax"), and renaming it the "COPE" (for "Corporate Offshore Profits Excise-tax"). I'm no marketing expert, but this is a lot catchier, and I can already see the journalistic possibilities ("Can U.S. Companies Cope with the COPE?").

New York's compassionate mayor

My favorite quotes in today's New York Times come from an article describing Mayor Bloomberg's visit to Goldman Sachs yesterday, apparently to cheer them up.

"It's from the gut ... These are his people, and he felt their pain .... I know this sounds strange, but running to cheer up the people in Goldman Sachs shows what's in his heart."

But no tears, apparently, for any of the "muppets" whom Goldman has gulled over the years, or for the U.S. taxpayers who paid 100 cents on the dollar (with respect to risky bets on AIG that Goldman had otherwise lost) on what has been called Goldman's "backdoor bailout" in the early stages of the financial crisis.

Forthcoming article

My recently posted article, "The Financial Transactions Tax Versus (?) the Financial Activities Tax," is tentatively scheduled to appear in Tax Notes on April 23. For this purpose, I have re-formatted it (without changing what's posted at SSRN) to use law review-style, rather than social science journal-style, references and citations.

Strange dream last night

This morning, I woke up from a dream in which I had been carrying a very large tame salamander in a big paper shopping bag with handles, walking down suburban streets with rectangular, green, well-trimmed lawns, in a temperate climate, on the way to my aunt's and uncle's house (although the former is in fact deceased) in the Bay Area. I apparently had just landed at SFO and bought the salamander. The beastie (whom I'll label as a male for convenience, though I had no sense of the gender) was about two feet long. enjoyed gobbling down nasty-looking bugs with multiple legs, and had dry skin like a lizard, rather than moist skin like an amphibian (which I noted with puzzlement, though without reclassifying him). At one point he had gotten out of the shopping bag, without my noticing right away, but I found him sitting on a lawn. He then was quite amiable about my grabbing him and putting him back in.

The dilemma that distressed me as I walked down the street, shopping bag in hand, perhaps looking for a Bay Area Rapid Transit stop (though I didn't have the BART's name in mind), was the following. On the one hand, I realized that my hosts might be less than thrilled if I showed up on their doorstep carrying a two-foot long amphibian (or even lizard) in a shopping bag. On the other hand, I was concerned that, if I simply released the creature to fend for himself, he might not be able to survive. I was totally fine with releasing him if I thought he would be okay, and I noted to myself that at least the Bay Area doesn't get cold like many places, but I still wasn't quite satisfied that I could release him in good faith.

The alarm clock jolted me out of this dilemma before I could decide what to do about it.

The Goldman Sachs resignation letter

Much excitement today around the blogosphere about Greg Smith's Goldman Sachs resignation letter - which took the form of a New York Times op-ed - in which he denounces the firm's "toxic" environment and commitment to ripping off its clients.

My favorite paragraph was the following:

"What are three quick ways to become a leader [at Goldman]? a) Execute on the firm’s 'axes,' which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) 'Hunt Elephants.' In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym."

Having taken the time to read a number of reactions, it strikes me that absolutely no one except for Goldman Sachs itself appears to have any doubt about the basic accuracy of his account.

Instead, criticisms of Smith's column appear in almost all cases to make one or more of the following points:

1) If he's so shocked, shocked, then what was he doing there for 12 years? But this in no way undermines the accuracy of his critique.

2) He says Goldman's culture has gotten worse, but it was always like that. Or, always since it ceased to be a private partnership. Same.

3) He blames Goldman's leadership, but the problem goes far beyond them, reflecting a broader Goldman culture or still broader financial sector culture and incentives. Same.

4) The clients need to be smarter, or they'll inevitably be ripped off. Same.

5) Clients may rationally use Goldman even though they know it rips them off and can't be trusted. Thus, Smith's suggestion that the firm is endangering its future by destroying client trust is overstated. Same.

For myself, long before reading this column, I knew for certain that, even if I were rich enough to use Goldman, I most certainly wouldn't, for the reasons stated by Smith. (Maybe if I were rich enough that they were afraid of me ... ) So there are really no surprises here for me.

I do think, however, that all this - with particular reference to point 5 above - is an important part of the story when we seek to explain financial institutions' recent hyper-profitability. Grist, I would say, for enacting something like the financial activities tax (FAT) that I discuss here.