Tuesday, January 12, 2010

More Taxes to Bank On

It's a little entertaining--and highly instructional--to observe how the Obamian Administration is bending over backwards to penalize the very industry it bent over backwards to prop-up with last year's bail outs.
The Wall Street Journal notes, with unemployment at 10%, Washington is now scrambling to show its independence from Wall Street and recoup taxpayers' losses accrued through the bank bailout by proposing a new tax on banks--especially those that have repaid their bailout funds.

This still-fuzzy notion might levy a fee on banks' profits or their liabilities "to compensate for losses in other areas, such as loans to Detroit's automakers and funds used to prop up American International Group Inc.," according to the report.

I am not sure which is more troubling: the “nebulous” nature of this un-plan—which consists at this point of little more than the idea (hey, let’s tax the banks)…or the more general bias of this Administration to shoot first and ask questions later (let’s give em some money; how we going to get it back? I dunno…)

This is a somewhat volatile position to take…but I am one who does not agree the banks should necessarily be the whipping boys to take the fall for a failed set of policies in Washington.

Remember, it was Congress that decided it would be a great idea for EVERYONE to own a piece of The American Dream, home-ownership, and set the stage for mortgage companies and banks to bend the rules of the universe to enable people who really shouldn’t be home owners to do so.

Then, when human greed supplanted common sense in the underwriting department, the smarter guys in the room decided to self-insure against crummy loans going bad with those credit default swaps. Sounded intricate and subtly sexy, but in the final analysis, it was little more than burying their collective heads in the sand in denial of the unavoidable collapse of a lending system devoid of any thresholds.

So the smartest guys in the Wall Street boardrooms were rewarded for the financial prowess by getting jobs in Washington, and decided it would be a good idea to just bail out the banks with your tax dollars. When public opinion against the banks became to large to ignore, like the sterling characters they are, these pirhana’s turned on their own, and now want to impose a punitive tax on the banks for their own engineered-survival.

While there is a side to all of us that is smugly satisfied that the mean old banks are might get slapped with fees that will make their own insidious fee structures pale in comparison, we should not lose sight of a more sinister side of this story: The government giveth, and the government most certainly taketh away…and if the banks are the targets now, which other industry is next? Another way of looking at this is the equation, “too big to fail = not too big to tax, tax, tax.”

We need to be a little circumspect in our rejoicing of the big banks being slapped with fees, because the next target, if we’re too successful, could be you and me.

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