Banking Law

WSJ: TARP Tax On Thin Ice?

Michael Corkery at the Wall Street Journal's Deal Blog points out something that bank haters seem to overlook: the overwhelming majority of TARP capital that was invested in banks has been paid back or will be paid back, and has earned the US taxpayer a sweet 8.5% annual return. The $1.9 billion in bailout funds at risk from shaky banks that might not pay it back pales in comparison to the largest TARP turkeys: AIG, General Motors and Chrysler. Those non-bank "add-ons" to TARP are especially galling, since they may very well account for the bulk of $107 billion the government expects to eventually lose from the TARP program and were never on the radar screen of most of the legislators who reluctantly agreed to drink the Bush administration's Kool-Aid and vote for the bailout legislation in the fall of 2008 (and bozos like this blogger who backed them up).

At any rate, Corkery argues that the fact that banks will have collectively made money for the US taxpayer should cut the pins out from under the Obama administration's claim (supported by Barney and the Boyz) that it should assess a "TARP Tax" of $120 billion on commercial banks to pay for the cost of bailing out GM, AIG and the rest of the non-banks, as well as those relatively few banks that ultimately stiff the Treasury. Of course, a lack of logical support never stops the federal government when it's hot on the trail of other people's money, so my guess is that that TARP Tax will still be levied.

Corkery closes with the thought that perhaps the only justification for taxing the banks in this instance is the same as Willie Sutton's reason for robbing banks: because that's where the money is.

Full post as published by Bank Lawyers Blog on April 06, 2010 (boomark / email).