Legal Commentary

What If . . .

By Big Tent Democrat

. . . the Geithner Plan is to finance his Masters of The Universe bailout through a long term tax on banks? Via Krugman and Salmon, Nemo describes how the government subsidies (through non-recourse loans) will artifically inflate the prices for toxic assets but a Nemo commenter envisions how the government could recoup the money:

[C]ouldn’t [the FDIC] just raise the bank tax (or wait since the FDIC historically builds up a reserve over time) until the [government funds] [are] repayed? Sounds like a simple way to effectively have the banks slowly dig themselves out of this problem. . . . The only real downside I see is that it is slightly unfair to banks that are in good shape, since they will have to pay the increase[d] FDIC fee even thought they didn’t participate. . .

More . . .

This would turn the Geithner Bailout into a recourse situation, albeit from ALL banks, not just the ones participating in the Geithner Bailout. This would certainly salve the unfairness to taxpayers but you still have the it won't work to save the banks anyway problem. But what if Geithner announced that any shortfalls would be recouped in this way? What would you think about that?

Speaking for me only

Full post as published by TalkLeft on March 23, 2009 (boomark / email).