Obama Proposes New Financial Crisis Responsibility Fee
The Obama administration recently trumpet their new “Financial Crisis Responsibility Fee”. This new tax will apply to the nations largest 50 banks regardless if they participated in TARP or not. They will also be slapped with Obama’s new Financial Crisis Responsibility Fee even if they have paid back any bailouts plus interest.
One of the facts that many Americans do not realize is that many banks were “encouraged” by federal regulators to take bailout money. Think of it as similar “encouragement” that Tony Soprano may have applied to get his way from time to time. Some banks needed funds, others did not. Most of those banks paid back those funds as soon as the government allowed them even paying interest on the money the received.
Interestingly enough, this tax will not apply to profits, but to liabilities. The following example should help those not versed in the ins and outs of balance sheet accounting:
Assume you and your neighbor both have car loans at bank A. Times get tough and your neighbor asks for a home equity loan to help cover expenses. Worried about everyone in your neighborhood, bank “O” in its infinite wisdom gives you and all your neighbors home equity loans, even though you don’t want it.
After some time, your bank allows those people in your neighborhood who can afford to, pay back their home equity loans (with interest).
Later that month, bank “O” realizes that you have enough money to go on vacation and even tip the teen that mows your lawn. Bank “O” then starts charging you interest on the balance of your car loan that you have at bank A. In the words of the president of bank “O”, it was your and your neighborhood’s fault that you all took on risky car loans that caused many of you to face financial crisis.
So even though you didn’t want the home equity loan and have paid it back, bank “O” wants to teach you a lesson and get money from you to help pay for the money your neighbor still owes to bank “O”.
As Michelle Malkin points out on her blog, this tax will pay for the incompetence of Tim Geithner when he was the NY fed reserve chair. It will also be passed on directly to consumers.
The Obama administration also hopes that its new Financial Crisis Responsibility Fee will discourage banks from taking on risky behavior by adding liabilities to their balance sheets. Liabilities are often the life blood that allows businesses to expand and grow.
The Financial Crisis Responsibility Fee is also forcing healthy banks to pay a fee to help support less health banks. As Marx said, “From each according to his ability, to each according to his need”.
Marx would indeed be proud.