Bank tax measure stymied by foreign governments
A proposal to levy a "bailout tax" on banks around the world failed to gain traction at the weekend’s Group of 20 meeting in Toronto.
Revenue from the proposed tax would be used to pay for future financial-institution bailouts, which – as the U.S. discovered late in 2008 – are quite expensive. The government’s Troubled Asset Relief Program has been paid back in full, but bailouts of insurer AIG and government-sponsored mortgage-finance companies Fannie Mae and Freddie Mac are costing hundreds billions of dollars.
In fact, the Fannie and Freddie bailouts could cost as much as $1 trillion, ratings firm president Sean Egan said two weeks ago to Bloomberg.
In last week’s reform-bill negotiations, representatives from the House proposed that big banks pay for the unwinding of Fannie and Freddie. The idea was shot down by those in the Senate; American Bankers Association CEO Edward Yingling called it "a tremendous additional liability on the banking industry of hundreds of billions of dollars."
Still, the idea of a bailout tax on the largest banks remains popular. President Barack Obama had hoped to achieve consensus on the measure at the G-20 meeting, but only European regulators gave it their imprimatur. Representatives from Canada, Australia and Japan vetoed the measure, arguing that an across-the-board tax might not be appropriate.
A "one-size-fits-all kind of approach may not be productive," Kazuo Kodama, the Japanese foreign ministry’s press secretary, said to the Associated Press over the weekend.
Prior to the G-20 meeting last week, representatives from the U.K., Germany and France signaled their support for a bank tax; those countries – along with the U.S. – may yet move to impose taxes on financial institutions.
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