The American Bankers Association reacted harshly Monday to President Obama’s proposal to levy a 10-year tax on the banking industry that would raise $61 billion to help U.S. homeowners refinance.
Obama had previously proposed a “financial crisis responsibility fee” on financial firms with assets exceeding $50 billion. That idea has been changed into a proposal to tax banks to help underwater U.S. homeowners refinance.
“The banking industry strongly opposes the $61 billion bank tax included in President Obama’s budget proposal,” the ABA said in a press statement issued shortly after the president unveiled details of his $3.8 trillion spending plan.
The ABA’s reaction seemed tailored more toward the president’s original plan to levy a “financial crisis responsibility fee” than to assist homeowners whose homes are worth far less than they owe on their mortgages.
The ABA statement said that despite claims to the contrary, taxpayers have profited $13 billion from their investments in banks through the Troubled Asset Relief Program, or TARP, and Treasury predicts they will see a lifetime positive return of more than $20 billion.
“Given that non-bank programs are responsible for all of TARP’s losses, this would simply be an arbitrary tax with no regard to where losses actually occurred.”
The American Bankers Associated said that while Obama’s plan may make for a good political sound bite, the proposed tax would needlessly damage the economy by reducing credit availability and driving capital out of the banking industry.
“A 10-year tax of $61 billion means that up to $600 billion in loans would not be made over that same time period,” the association said. “Millions of small business loans would be in danger of not being funded, borrowing costs would likely increase and consumers and businesses would have less credit availability as the economy struggles to find its way forward.”