Either buckling to populist pressure or finally showing his true colors, President Obama revealed a plan to tax the largest banks in America to recoup up to $120 billion of the bailout money doled out over the past year. Catching banking lobbyists flatfooted, the proposal from out of left field is set to hit Congress next month.
Most likely, it will be a tax on profits much like the windfall profits tax bandied about during the oil run-up a couple years ago. Alternately, it could be a tax on the loan activity of the largest banks. At a time when banks are being encouraged to loan money to small business, in fact when banks are being scolded by the President to do so, it seems disingenuous to set up a tax on the very same criteria. But here we are.
I think we can expect the proposal to gain some traction in Congress as well. The Dems are against the ropes going into the mid-term elections, Barney Frank has already admitted that he's known something like this was in the works, and nothing panders to a pissed off public like punishing Wall Street.
I guess where I have the most difficulty with this is figuring out the math. If you have the Federal Reserve giving away the house with zero percent interest rates and encouraging "bank holding companies" (/ /et al) to borrow Fed funds for prop , how do you turn around and slap a tax on the excess profits from those already tawdry associations?
While Obama has publicly shunned extraordinary taxes on executive compensation, don't be surprised to at least see a bonus tax proposed. For lack of a better word, that type of tax was "successful" in Britain, and the pogues in DC might think that it just might fly here. Nothing is out of bounds.