The White House’s assault on the banking industry just won’t stop. For the third year in a row, the Obama administration has stuck in its budget a proposed tax on large banks-a “Financial Crisis Responsibility Fee” of around 17 basis points of deposits and liabilities-that’s intended to “recoup the costs of the TARP program as well as discourage excessive risk-taking.” The White House says in its new budget that it expects the levy to bring in $61 billion.
Please. This proposed tax isn’t just outrageous, it’s ridiculous. To begin with, the banking industry has already repaid TARP-and then some. If you add up the dividends the government received on its preferred shares and the gains it earned when it sold its warrants, the bank portion of the program has netted the feds a gain of over $13 billion with more still to come. There’s nothing more to recoup! Yes, TARP overall has cost the government money. But that’s because the investments in the non-banks in the program, AIG, Chrysler, and G.M., are still money losers. But those three are non-banks! If the government is so keen to get its TARP money back, why doesn’t it dream up new ways to tax the auto industry? Yet I somehow doubt that that’s going to happen.
Then there’s this business about the fee discouraging “excessive risk-taking.” Again, ridiculous. The government already has all kinds of ways-from risk-based capital standards to its own zealous bank examiners-to ensure that banks don’t take imprudent risk. Dodd-Frank added an additional layer of tools. The new fee would be superfluous. Besides, based on what people in the White House have lately said, from President Obama on down, they’d prefer banks take more risk right now, not less. How’s a new tax on banks supposed to help?
This new tax has nothing to do with either repaying TARP or reining in excessive risk. It’s just another instance of this administration’s seeming fixation with showering benefits on groups it approves of while punishing those it does not. Are you in the solar energy business? Here are some subsidies and tax credits! Are you a unionized auto worker? No problem, we’ll save your contract by stiffing your employer’s secured creditors!
But if you’re on the wrong side of this administration, you pay-literally. The White House thinks it has figured out a way to turn the banks into its piggy bank and its whipping post all at once. That’s not just unfair to the banks, it’s bad for the economy. The administration should be doing everything it can (and it can be doing plenty, trust me, starting with telling the people at the OCC to lighten up) to encourage that creation of bank credit. But it seems to want to do the opposite. Happily, the White House’s proposed new bank tax is likely headed nowhere in Congress. But if you’re looking for evidence that this White House wants to become more banking-friendly, this new bank tax is a sign you’re likely to be disappointed. .
What do you think? Let me know!