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Tuesday, February 8, 2011

A Tax Unfair to Big Banks?

The Securities Industry and Financial Markets Association claims that the bank tax proposed by the Obama Administration as part of the Financial Reform Act of 2010 might be unconstitutional because the levy would unfairly single out and penalize big banks.  For his part, President Obama urged the financial lobby to stand down when he introduced the tax proposal. “Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee," he said, "I suggest you might want to consider simply meeting your responsibilities.” The banks had tried to head off criticism by starting new charitable programs and by structuring executive bonuses in line with principles set by the federal pay adviser, like paying bonuses mostly in stock instead of cash and deferring the payout of some bonus money in case business declines again.  However, new charities and stock compensation should not obfuscate the fact that banks too big too fail precipitated the financial crisis of 2008 and returned soon thereafter to trading on their own equity (e.g., Goldman Sachs), thanks in part to the TARP funds from Teasury.  That the bank lobbyist organization was oriented nevertheless to void the new tax through lobbying and litigation, claiming it would hurt the big banks disporportionately, demonstrates that the bankers just didn't "get it." They should be glad that the resulting Reform Act left undisturbed the very existence of banks too big to fail. 

Source: http://www.nytimes.com/2010/01/18/business/18bank.html?ref=politics