Explaining Obama’s strange bank tax
The WH wants to tax banks to pay for the $120 billion that TARP may end up costing taxpayers. A few thoughts:
1) Remember that most major banks have repaid their TARP capital injections, earnings Uncle Sam a decent return.
2) The tax would apply to these banks. For the biggest banks like JP Morgan, it would cost them $20 billion a year over the next five years.
3) The tax would not apply to the folks actually losing the government money: AIG, the automakers and homeowners.
4) The WH wants to banks to loan more but it also wants to suck up $120 billion in capital. And it is unclear how the WH would prevent this costs from being passed on to customers through higher borrowing rates.
5) Right now, the chances of this happening are less than 50-50.
6) A cynic might say that this is all an distraction by a WH seen as too cozy with Wall Street and whose financial reform plan neither limits the size nor complexity of banks. As it is, its financial reform plan is stalled in the Senate.