Explaining Obama’s strange bank tax

January 12, 2010

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.


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Repeat after me: One term wonder. Fortunately America will recover after he’s gone.

Posted by gotthardbahn | Report as abusive

What a total disappointment!

Tracy, Status Now

Posted by Tracy9999 | Report as abusive

Lets see, punish JPM, because ….. They did things right, made money, paid taxes and employ thousands, not to mention, got the government out of a jam with Bear Sterns and WaMu.

If only all banks could be like Citi ……

Posted by Ed753 | Report as abusive

[…] inhibiting factor to economic growth.             http://blogs.reuters.com/james-pethokouk is/2010/01/12/explaining-obamas-strange- bank-tax/              &nbs p; Here is an […]

Posted by What are these morons thinking about? – Steve Cook on Disciplined Investing – InvestorsInsight.com | Financial Intelligence, Advice & Research / Investment Strategies & Planning for Individual Investors. | Report as abusive

in regards to #4:
There’s no reason to prevent the cost from being passed on. Higher costs / lower returns will drive customers away turning a TBTF bank into a smaller beast.

Not that that perk makes this a good idea.

Posted by drewbie | Report as abusive

lets see, the government prints the money, the banks use the money, the tax payer borrows and repays the money plus interest with lower value dollars.
Hmmmmmmmmm, clear to me.
But one simple question: If the tax payers have to pay higher loan rates with lowered value dollars, ,then they will borrow as little as they can- if at all.
The net result is few new loans.

Shouda let the titans fall and the thrifty would have emerged as the new top species on the planet.
You know, like when the dinosaurs made way to the mamals.

Sounds clear to me.


Posted by clearthinker | Report as abusive