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Taxing the Banks   January 14th, 2010
Who are Obama's fiscal wizards that come up with this nonsense?       

 
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So now President Obama has announced a new bank tax. Wasn't the idea over the last year to get banks loaning money and forcing them to absorb losses in order to restructure loans? How does taxing them move banks towards that goal?

The "financial crisis responsibility fee" would target major institutions. It would be levied on those that were the main contributors to the financial crisis and the most significant beneficiaries of the extraordinary actions taken by the Federal Reserve and the Treasury Department...

The president's proposal calls for the tax to be in place for a minimum of 10 years, but longer if necessary. "The fee will stay in place until every penny of TARP is repaid," a senior administration official said...

Firms could be subject to the fee even if they never took TARP funds or if they took TARP funds but repaid them...

If the fee ends up raising more money than is needed to fully repay the bailout money, the additional funds would be used to help improve the U.S. fiscal position, which was worsened by the crisis, the senior administration official said.


This is priceless on so many levels.

First of all, this is not a fee. It's a tax. At least CNN, unlike the administration, had the decency to call it what it was; the title of the article was "Obama calls for bailout tax." It's a tax because it's applied even to those banks that didn't participate in TARP, and because the money it raises may be used to "improve the U.S. fiscal position" rather than simply pay for specific services. So this is a tax, not a fee.

Second, if this tax is being justified on the basis of recovering money the government spent to save some banks, why is it being applied to banks that didn't participate in TARP, or banks that participated but already paid back the money? If I'm a responsible company and my competitors were irresponsible and had to be bailed out, why should I have to pay a higher tax because of the irresponsibility of others in my industry?

Third, hasn't the "problem" for the last year been that banks aren't lending enough money? I don't actually believe that's true, but that's the argument that the administration has been making. Banks aren't loaning enough money to allow the economy to recover, and banks aren't willing to lose money in the process of modifying loans. If these are the things the government wants banks to do, then how does taxing them more achieve those goals? It doesn't.

Fourth, while TARP did weaken the fiscal position of the U.S. by increasing its debt, many banks didn't even want it. TARP was forced on many. Forcing an industry to take money it didn't want, and then forcing them to pay a tax because they took it, is disgusting.

But the logic gets more twisted:

Some major beneficiaries of the financial bailout will not be subject to the fee - namely, mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and automakers GM and Chrysler.

In those cases, the administration didn't think the fee would be workable both because of the structure of those companies' assets and because of their current condition, the senior administration official said.


In other words, the government is exempting the companies it owns from this tax. This is the height of hypocrisy. Why? Because they don't think it "would be workable" and because of their "current condition."

That is to say, the administration has become a cliche: It's punishing successful companies with a tax while rewarding failed companies with an exemption.

Of course, this isn't about paying back TARP or bailouts. This is about executive pay:

Obama bluntly said that banks should tap their bonus pools to pay the fee.

"I'd urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill, but by rolling back bonuses for top earners and executives," he said.


Who are the people that are coming up with economic policies in this administration? In their efforts to punish the top wage earners, they will cause banks to loan less money and possibly stifle any recovery that may be underway.

Why? Because socialism isn't about achieving equality by raising up the poor; it's about achieving equality by making sure the rich are just as miserable as everyone else.

And if you think we can build a better America by making sure no-one is wealthy, I have a bridge to sell you in the Mojave Desert.

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