Prominent Republicans are coming out in opposition to President Barack Obama’s proposal for a $90-billion fee on large banks that took bailout money, a move that political observers say could force the GOP to choose between their traditional anti-tax position and populist anger over the bailout.
On Thursday, GOP Chairman Michael Steele declared that the bank fee — which would be levied only on banks that took bailout money and have more than $50 billion in assets — is “another tax on the American public.”
“The fact is this money has already been paid back by the banks and this punitive tax will hurt Americans’ savings and discourage job creation at the worst of economic times,” Steele said, as quoted at the Huffington Post.
The issue has percolated its way into the nail-biter Massachusetts Senate race, where Democrat Martha Coakley is in a dead heat with Republican Scott Brown for Ted Kennedy’s old seat. The race has the potential to halt the president’s health care agenda if the seat falls into Republican hands.
On Thursday night, Brown’s campaign declared that “Scott Brown is opposed to higher taxes, especially in the midst of a severe recession. Raising taxes will kill jobs. Martha Coakley’s tax-raising policies will make it harder to get our economy back on the right track.”
If the Democratic strategy is to “box in” Republicans on the issue, then “Brown has taken the bait,” writes Jonathan Weisman at the Wall Street Journal.
Coakley — who has been accused of running a lackluster campaign — immediately pounced on that statement, issuing a statement that Brown explain exactly where he stands on the fee, which seeks to recoup some of the money taxpayers lost in the bailout.
As Attorney General, I have taken on Wall Street and recovered millions for the taxpayers of Massachusetts. As Senator, I would support this proposal because it holds the largest Wall Street firms accountable for their abuses that caused millions of people to lose their jobs, as well as it works to recover the hard-earned taxpayer dollars of the middle class.
Now is the time for Scott Brown to tell us what side he’s on, and who he wants to fight for. Despite his tea party rhetoric about never supporting a tax hike, the truth is that he has supported more than $300 million in new taxes and fees on middle class families. We’ll find out if his “no tax” pledge only applies to the privileged.
“To the extent that Coakley has shown any passion in her Senate race, it’s for cracking down on Wall Street bankers. So she’s positioned to play this up. We’ll see if she can,” writes David Dayen at FireDogLake.
The banks themselves are also taking on the proposed bank fee.
“The money to be collected is capital being pulled out of the banking system that could support ten times the amount in new lending,” a “senior industry leader” told Politico’s Mike Allen. “That’s because one dollar in capital supports $10 or more in lending. So the tax will pull not $90 billion in lending capacity out of the banking system, but $1 trillion in potential lending.”
For some fiscal conservatives, the bank fee presents a moral dilemma. On the one hand, there is plenty of resentment on the right about the use of $700 billion in taxpayer money to bail out banks. On the other, fiscal conservatives are loathe to accept any form of new taxation.
It’s precisely that dilemma that Democrats hope to exploit.
“While the GOP has muddied the waters on financial reform, the Wall Street fee is a bright line: either you are on the side of making taxpayers whole or you want to protect outsized profits at the big Wall Street banks,” an unnamed administration official said. “If the GOP lines up with Goldman and company on the fee, it’ll make it easier for Dems to demonstrate that they are protecting the ‘fat cats’ and opposing real change to Wall Street.”