Obama Is Now Taxing Risk Taking?

I don't know where he and his team come up with this stuff but his bank tax proposal just seems like such a bad idea. Two things, first he is disincentivizing banks from taking risks as the more a bank takes risks,t he higher its taxes will be. This will have a negative impact on our long term growth as we do need risk capital to keep the economy going. Also, he is forcing the banks to pay for the bailout of GM and Chrysler, saying it's their fault the car companies went under. I think its because they made crappy cars and had unions sucking the life out of them. Anyway, the WSJ has details:

President Barack Obama is expected Thursday to propose taxing large banks and other companies based on their exposure to risk, White House officials said.

The plan marks the latest in a slew of proposed fees, penalties and constraints the White House envisions slapping on Wall Street during the cleanup of the U.S. financial crisis, and marks a new stage in the White House's populist assault on the finance industry.

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If approved by Congress, the new tax -- which the White House calls a "financial crisis responsibility fee" -- would force about 50 banks, insurance companies and large broker-dealers to collectively pay the federal government roughly $90 billion over 10 years. Of the 50, about 35 would be U.S. companies and 10 to 15 would be U.S. subsidiaries of foreign financial firms.

A senior administration official said the largest 10 institutions would pay about 60% of the tax's total cost.

Roughly half the 50 would be U.S. banks, including the largest, Goldman Sachs, J.P. Morgan Chase, Bank of America and Morgan Stanley. Because large firms that benefited from the government's debt guarantees would also be included, the tax would hit companies such as General Electric Co. Banks that have repaid their TARP money wouldn't escape taxation.

The taxed firms are expected to pay the cost of bailout money that went to General Motors Co. and Chrysler LLC, which are exempt from the tax. The administration official defended the omission by contending that U.S. auto makers collapsed in part because of a financial crisis of the banks' making.

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Under the proposal, a 0.15% tax would be levied on liabilities. The tax would apply to bank holding companies, thrifts, insurance companies that own financial arms and broker dealers with at least $50 billion in assets that received assistance under TARP, the FDIC's temporary loan program or other crisis efforts.

The tax would be levied on total assets, minus a type of capital considered high quailty, such as common stock, and disclosed and retained earnings. FDIC-covered deposits and insurance policy reserves would be untaxed because such assets are already subject to federal fees, the administration official said.

Under that formulation, banks that lean heavily on funding sources other than customer deposits would pay proportionally higher taxes. That means that Goldman Sachs and Morgan Stanley could get penalized. Another big loser could be Citigroup, whose main U.S. banking unit's insured deposits represent a relatively small slice of the company's liabilities.

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Rep. Scott Garrett (R., N.J.) has said any tax or fee could hinder the economic recovery and further limit the industry's ability to extend more loans. Mr. Dimon, when asked how any tax could be felt by consumers, said "all businesses tend to pass their costs on to their customers."

"How you are going to tax banks and expect them to lend more is frankly lunacy," said Rep. Jeb Hensarling (R., Texas).

As large banks appear to regain their footing on Wall Street, their standing in Washington continues to deteriorate. Sen. Bill Nelson (D., Fla.) said Wednesday that he planned to impose new restraints on executive compensation at large banks.

The new White House tax would be in addition to other fees against big banks authorized by a recent bill passed by the House that would require large financial companies to finance a $150 billion fund to pay for future failures of large companies.