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View Full Version : Obama bank tax: Smart policy or bank bashing?



mick silver
20th January 2015, 03:09 PM
Obama bank tax: Smart policy or bank bashing?By Matt Egan (http://money.cnn.com/author/matt-egan/index.html?iid=EL) @mattmegan5 (https://twitter.com/intent/user?screen_name=mattmegan5) January 20, 2015: 11:25 AM ET




http://i2.cdn.turner.com/money/dam/assets/150119163354-obama-bank-tax-wall-street-620xa.jpg








President Obama wants to hit big banks with a new tax to discourage them from taking too much risk. The proposed tax, to be announced during Tuesday night's State of the Union address, is unlikely to get through the Republican-controlled Congress. Yet it will appeal to many voters and represents an opening salvo in the battle to set the agenda for the 2016 presidential election.





CNNMoney fact checks the White House's bank tax proposal.
Will it generate tax revenue? Definitely. The proposal would generate lots of money from the sector that was kept alive by a taxpayer-funded bailout.
JPMorgan Chase (JPM (http://money.cnn.com/quote/quote.html?symb=JPM&source=story_quote_link)) alone could be on the hook for at least hundreds of millions of dollars in new taxes.
That new revenue could then be used to help boost stagnant wages (http://money.cnn.com/2015/01/09/news/economy/wages-raise/index.html?iid=EL) for the middle class by funding programs like Obama's plan for two free years of community college. (http://money.cnn.com/2015/01/08/pf/college/obama-free-college/index.html?iid=EL)
"These are institutions that have made enormous profits. They can afford it," said Robert Shapiro, a senior fellow at Georgetown University's McDonough School of Business.
Related: State of the Union Spoilers (http://money.cnn.com/2015/01/18/news/economy/state-of-the-union-middle-class/index.html?iid=EL)
Will it encourage banks to reduce risk? Maybe. Too much leverage -- the amount banks borrow relative to their capital -- helped cause the financial crisis. Big banks like Lehman Brothers bet the house -- and lost.
The White House said the proposed bank tax would "make it more costly for the largest financial firms to finance their activities by borrowing heavily."
The proposal said it would target liabilities, yet it's unclear how that would work in practice. If Obama were to target all liabilities, banks could respond by simply making fewer loans.
"It's going to raise the cost of capital. It will reduce the capacity of the banks to make loans," said Jeffrey Shafer, a former official at the Treasury Department and Citigroup.
Related: Falling oil's next victim: banks (http://money.cnn.com/2015/01/16/investing/oil-price-fall-banks-hurt/index.html?iid=EL)
Is it smart policy? Probably not. The bank tax will definitely poll well with voters. After all, it's easy to hate on the big banks that helped cause the financial crisis. In that sense, the bank tax is smart politics by Obama.
But it's much tougher to argue it's smart policy.
"It makes absolutely zero sense. It's clear to me all economic-policy thinking has gone out the window on this. It's pure politics," said Shafer.
Through the Dodd-Frank reform law, regulators are already trying to prevent the next crisis by forcing banks to beef up on capital, the money used to cushion against losses.
They are also making banks become more liquid, meaning they must hold assets that can be sold easily, even during times of panic.
The proposed bank tax is "not an efficient way" to make the system safer, said Shapiro, a former economic adviser to Democrats like Bill Clinton and Al Gore. "It is not a substantial argument."
Related: Big banks aren't looking so pretty (http://money.cnn.com/2015/01/12/investing/banks-earnings-wells-fargo/index.html?iid=EL)
Will it fix Too Big To Fail? Not really: Supporters of a bank tax argue it makes sense to charge mega banks like Goldman Sachs (GS (http://money.cnn.com/quote/quote.html?symb=GS&source=story_quote_link)) for the fact they enjoy lower borrowing costs because everyone assumes the government would bail them out.
Yet the tax Obama is now proposing wouldn't just be limited to those Too Big to Fail banks. It would hit the roughly 100 U.S. banks that have over $50 billion in assets, including regional lenders like Huntington Bancshares (HBAN (http://money.cnn.com/quote/quote.html?symb=HBAN&source=story_quote_link)) and Zions Bancorp (ZION (http://money.cnn.com/quote/quote.html?symb=ZION&source=story_quote_link)).
"This is a shotgun, not a bullet," said Ernie Patrikis, a partner at White & Case who used to be general counsel of the New York Federal Reserve.
The bank tax, which is already being opposed by Wall Street's trade groups, could even backfire.
"It would just increase bank costs, which would have to be passed on to customers in other ways. There's no free lunch," said Patrikis.

Shami-Amourae
20th January 2015, 04:32 PM
Expect banks to start charging you negative interest rates.
:rolleyes:

mick silver
20th January 2015, 05:23 PM
they are already do that , that's why I also tell people keep what you need to pay bills , buy stuff like your life needed the stuff like food an whatnots ,

hoarder
20th January 2015, 05:26 PM
Allow banks to issue currency out of thin air, then tax them. What a statesman!

expat4ever
20th January 2015, 06:33 PM
"These are institutions that have made enormous profits. They can afford it," said Robert Shapiro, a senior fellow at Georgetown University's McDonough School of Business.
Wow this is what they learn at a school of business? They can afford it so we should tax em? Sort of takes any incentive out of making any money more than you absolutely need.
What we need is a national strike. Thats when Gov understands who they work for.

Hitch
20th January 2015, 09:41 PM
Small step in the right direction at least. Anything the big banks don't like, I tend to like!

Twisted Titan
21st January 2015, 04:09 AM
This is absolute bullshit.

Any tax on big business eventually gets born by whom?

Jack and Jane Q public

If any such legislation passes you can mark your calendar and count the days until a new bogus fee shows up on your monthly statement.


This is the EXACT playbook they ran with Ohshitcare insurance companies were crying that they had to provide insurance to sick people....Now they made eveybody get a insurance under penalty of IRS tax levy, so tell me who got the short end of the stick?

The same will happen with this bank tax.

Spectrism
21st January 2015, 09:27 AM
You can't know what's in it until you pass it.

old steel
21st January 2015, 09:37 AM
Barry says "our country has been through a terrible trial"? LMFAO!

Fool that he is, doesn't he realize it is only just starting in?

Spectrism
21st January 2015, 09:56 AM
Barry says "our country has been through a terrible trial"? LMFAO!
Fool that he is, doesn't he realize it is only just starting in?

Probably not. He has not future vision except what his master tells him. The answer to any problems will be more government controls.

Serpo
21st January 2015, 03:44 PM
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