Well, something has to be done!
President Obama will try to recoup for taxpayers as much as $120 billion of the money spent to bail out the financial system, most likely through a tax on large banks, administration and Congressional officials said Monday.The president has yet to settle on the details, and his senior economic advisers are weighing a number of options as they finish the budget proposal Mr. Obama will release next month.
The general idea is to devise a levy that would help reduce the budget deficit, which is now at a level not seen since World War II, and would also discourage the kinds of excessive risk-taking among financial institutions that led to a near collapse of Wall Street in 2008, the officials said.
But the president also has a political purpose — to respond to the anger building across the country as big banks, having been rescued by the taxpayers, report record profits and begin paying out huge bonuses while millions of Americans remain out of work.
The administration previously rejected two ideas that have received much attention in recent months: a transaction tax on financial trades and a special tax on executives’ bonuses.
The most likely alternatives would be a tax based on the size and riskiness of an institution’s loans and other financial holdings, or a tax on profits.
Lobbyists for bankers, taken by surprise, immediately objected to any new tax. They said financial institutions had been repaying their portion of the bailout money in full, with interest. Losses from the $700 billion bailout fund — estimated to run as high as $120 billion — are expected to come from the automobile companies and their finance arms, the insurance giant American International Group and programs to avert home foreclosures, and the president is aiming to recoup that money.
“It is perplexing to us,” said Edward L. Yingling, president and chief executive of the American Bankers Association. He recalled that Mr. Obama recently had two White House meetings with bankers to urge them to provide more loans to credit-starved small businesses. But a tax, he said, would be “a hit on banks that will decrease their ability to lend.”… [emphasis added]
Inserted from <NY Times>
Of course cousin FatCat and his bankster buddies oppose this, but their arguments are pathetic. The statement that they are paying back everything they got with interest ignores a crucial fact. A huge portion of governments $120 billion loss comes from bailing out AIG, and most of those funds were payments to banks, snuck through the back door by Geithner and Paulson. Saying that a tax would decrease their ability to lend is bogus, because they aren’t lending anyway. They’re speculating. I can’t say whether or not I endorse Obama’s plan until he presents it. I cannot evaluate it until I know what it is.
13 Responses to “Obama Considers a Big Banks Tax”
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Tax the hell out of the bonuses as well. If they pay excessive bonuses to retain the "best" people then isn't that like supplying victims to a serial killer and then letting them go free?
excerpt from: Administration Bank Tax Plan: An Empty Populist Gesture by Design? With its talk of new taxes on banks, is Team Obama reverting to its now well established pattern of crony capitalist giveaways with the occasional phony populist reform as an increasingly ineffective disguise? The extraordinarily unenthusiastic, perhaps inept by design, discussion of its plans to tax banks in some yet undetermined manner certainly says so.
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Get a load of these remarks from the usual MSM suspects. In each case, we have chosen the first sentence which says why the Administration is planning to move ahead:
Wall Street Journal: “The White House hopes the fee will soothe the public’s anger at financial firms.”
Financial Times (subhead on first page summary): “Aim to address anger over bonuses.” From the story itself: “The proposal comes as the administration faces increasing pressure from Democrats in Congress to take punitive action against banks. The White House is trying to contain anger in a week in which banks will begin announcing billions of dollars in new bonuses.”
From Politico.com (which broke the story): “A fee on banks would help solve two political problems for the White House. First, the administration would benefit politically from tapping into the populist anger about enormous 2009 banker bonuses that will be announced in coming days. And second, it would help stem some of that backlash from the GOP about runaway federal deficits.”
Yves here. This “we need to appease the peasants” logic tells all…
Mark I agree, but they have to be careful or the law will not pass Constitutional muster. Bills of attainder are forbidden.
RJ, your source's tin foil hat is showing. As I refuse endorse the plan, because it hasn't yet been proposed in detail, they should wait to condemn it until there is something substantive to condemn.
I think everyone – right, left or center – is pissed about the bank bailouts. Paulson held a gun to Congress' head and basically said "If you don't give us this money, then the whole world will collapse."
I am disappointed that with our 80% stake in AIG that it is not being summarily dismantled. They are like the arrogant Arthur Anderson of 2008-2009. Same with the banks – Chase and Shitty bank are insolvent. Take them apart and sell it off. And the arrogance of paying bonuses to the same people who almost destroyed the entire financial system is beyond disgusting. And they'll do it again in a few years.
Right on, Lisa.
tomcat, yves' article is more a general criticism of the team obama approach, from the poor sell on health care, to the bank-centric policies…she goes on to explain: "Obama’s formal presentation often uses what I believe NLP calls hypnotic speech. It sounds wonderfully uplifting while you are listening, but when you get done, you scratch your head, because there was so much abstraction and imagery relative to content that very little of substance is said… The audience is left with a favorable impression of the speaker but not much in the way of concrete ideas that it can recall, which is perfect for campaigners who studiously want to avoid making promises. Hypnotic speech is good for creating a positive image, not good at all for conveying content of any complexity."
and furthermore: "the Administration is so profoundly captured by the banksters that it sees nothing wrong with what is happening, save the political fallout. It’s perfectly OK for banks to go right back to status quo ante, looting their firms by paying themselves too much in bonuses and not retaining enough in the way of risk buffers. And why should they change behavior, now that it has been conclusively demonstrated that if they screw up in a big way, the government will run in, and they make even more money as a result? These are the worst imaginable incentives; intervention is the only solution, with the only question what form it should take.
Seeing the problem merely as “the public is angry” implies that the collective reaction is simply emotional, and by implication, unjustified. That is 180 degrees wrong."
if thats wearing a tinfoil hat, then its the same one im wearing…
RJ, I have been highly critical of Obama's economic policies. I'm just saying that we should wait until a proposal is introduced in detail. To do otherwise is a knee-jerk reaction, more suitable for the GOP that for progressives.
Bank bailouts cut off the normal process of capitalism.
Federal money always comes with strings and regulations. I see no reason why bankers should be any different.
We should impose a sales tax on financial transactions. Wall Street buys and sells billions, yet there is no sales tax on those transactions. A sales tax on those transactions would generate abot 700 billion dollars. If we can tax the sale of clothing, fuel, cigs, liquor, and everything else in society, why not financial transaction sales?
Tom Cat,
You posted a comment (thank you) on my "Botticelli" post. Sorry, I mistakenly clicked "reject" on my comment moderation. I copied your comment from your email out of my "trash bin", and posted it in its entirety. There is no link to your blog through your name. Sorry
I'd read Yves post too and must admit I agree. Sorry TomCat, I hope I'm being cynical and too hasty but I fear it's gonna be like the HCR bill.Watered down for the benefit of the F.I.R.E sector.
It's hard not to be cynical when we are talking about a politician.
Lisa watch some crazy New World Order thing last night that alleges Obama's involvement. If TC wants to a NWO post, I will get into my complete disregard for that 'organization'. Anyway, I told Lisa that, in the end, politicians have no purpose, other than to debate. That's it. Sometimes it is with their constituents, sometimes with each other, but that is all they do. Hell, they don't even write laws anymore, they have their LEGAL STAFF do it. I find that hilariously/sadly ironic.
So, whatever the Admin puts forward will be some kind of bone to the ignorant masses that are upset over billion dollar bonus pools instead of multi-trillion dollar government backing of financial institutions. *cough, cough* oh, crap, the smoke and mirrors show is starting already?? Somebody help me to my seat before I step in a big pile of BS!!
Tom, wouldn't such a tax impact plain folks with pensions? It's the tax shelters for the rich we need to tax. No problem on the comment. 🙂
Otis, I agree wit it too. He's probably right, and I fear the same. My only beef is basing present condenmantions of Obama on the fear over future actions.
Otis, I often think it would be a good idea to ban lawyers from congressional service and from their staffs.
Yes, but we have to change the law and be able to tax those off shore, and sheltered income assets. I'm ALL for it.
Yes, but pension groups buy and sell much less often.
ANY tax, or fee will end up being paid by the individual.
Taxes on financial transactions are a lot less oppressive to the less well off, than taxes on food, water, clothing, and other basic needs.
Tom, how about an income tax surcharge of 95% on all income over $5 million per year?