Obama admin to tax banks to make up for GM losses

President Obama wants to tax the banks to help the struggling economy. Needless to say, the banks will pass those higher taxes along to their customers – you and me.

Globe and Mail: Tapping into populist outrage over the financial crisis and Wall Street bonuses, the White House is selling a controversial plan to slap a fee on banks to ensure they shoulder the full cost of massive financial bailouts and help tackle record U.S. deficits.

U.S. President Barack Obama is eager to send a message to Wall Street as many financial institutions report a return to handsome profits while the broader economy remains sluggish and unemployment is at a troublesome 10 per cent. …

Obama loves tapping into populist outrage. But the banks aren’t the problem, it’s Obama’s favorite pet projects.

Reuters: U.S. taxpayer profits from bank bailout investments are being offset by estimated losses from American International Group and automakers and mortgage payment cuts for struggling homeowners, a U.S. Treasury report showed on Monday.

The Treasury estimated net losses on its $700 billion bailout program at $68.5 billion for the fiscal year ended September 30, 2009.

The December report for the Troubled Asset Relief Program, or TARP, showed that the fiscal 2009 net loss included estimated losses of $30.4 billion for AIG and $30.4 billion for automakers, with $27.1 billion in losses from the Home Affordable Modification Program.

These were much larger than a $15 billion profit registered from the Capital Purchase Program for banks and $4.4 billion in profits from other bank investments, asset guarantee and lending programs.

The idiocy of this policy isn’t lost on Megan McCardle.

So we ought to tax bank profits because . . . GM is losing money just like everyone said it would.

I am all for regulation which prevents banks from taking on too much leverage–or encouraging others to do so by offering stupid loans. I would very much like to find a system of financial regulation which results in a financial structure that isn’t so utterly dominant (and bloated) as it has been for the last two decades. But I’m failing to see why the banks in particular–or rather the customers of the banks who will enjoy higher fees and lower interest rates–ought to bear the financial cost of the Administration’s ill-advised bailout of the UAW.

[...]

But if we want to bail out GM, we should pony up out of the income tax, not cast about for the least popular group we can find. That’s no way to run a tax code, or an economy.

My only disagreement with that last part would be that a president has no business trying to run an economy. Too many Americans are finding that out the hard way.

Thanks, Barack!

Via memeorandum