No Runny Eggs

The folks on The Wall Street Journal’s editorial board fired for effect on the “Subsidize Government Companies” proposal from Barack Obama on Saturday (emphasis in the original):

Mr. Obama’s new “Financial Crisis Responsibility Fee”—please don’t call it a tax—is being sold as a way to cover expected losses in the Troubled Asset Relief Program. That sounds reasonable, except that the banks designated to pay the fee aren’t those responsible for the losses. With the exception of Citigroup, those banks have repaid their TARP money with interest.

The real TARP losers—General Motors, Chrysler and delinquent mortgage borrowers—are exempt from the new tax. Why the auto companies? An Administration official told the Journal that the banks caused the crisis that doomed the auto companies, which apparently were innocent bystanders to their own bankruptcy. The fact that the auto companies remain wards of Washington no doubt has nothing to do with their free tax pass.

Also exempt are Fannie Mae and Freddie Mac, which operate outside of TARP but also surely did more than any other company to cause the housing boom and bust. The key to understanding their free tax pass is that on Christmas Eve Treasury lifted the $400 billion cap on their potential taxpayer losses expressly so they can rewrite more underwater mortgages at a loss.

In other words, the White House wants to tax more capital away from profit-making banks to offset the intentional losses that the politicians have ordered up at Fan and Fred. The bank tax revenue will flow directly into the Treasury to be spent on whatever immediate cause Congress favors. Come the next “systemic risk” bailout, taxpayers will still be on the hook. “Responsibility” is not the word that comes to mind here.

It also notes that the $50 billion in assets floor for this new tax is not exactly a “too big to fail” threshhold.