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What If . . .

. . . the Geithner Plan is to finance his Masters of The Universe bailout through a long term tax on banks? Via Krugman and Salmon, Nemo describes how the government subsidies (through non-recourse loans) will artifically inflate the prices for toxic assets but a Nemo commenter envisions how the government could recoup the money:

[C]ouldn’t [the FDIC] just raise the bank tax (or wait since the FDIC historically builds up a reserve over time) until the [government funds] [are] repayed? Sounds like a simple way to effectively have the banks slowly dig themselves out of this problem. . . . The only real downside I see is that it is slightly unfair to banks that are in good shape, since they will have to pay the increase[d] FDIC fee even thought they didn’t participate. . .

More . . .

This would turn the Geithner Bailout into a recourse situation, albeit from ALL banks, not just the ones participating in the Geithner Bailout. This would certainly salve the unfairness to taxpayers but you still have the it won't work to save the banks anyway problem. But what if Geithner announced that any shortfalls would be recouped in this way? What would you think about that?

Speaking for me only

< BoA Analyst: Geithner Plan Won't Work | Monday Night Open Thread >
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  • Display: Sort:
    OT, just in: Koh to State Dept. (5.00 / 1) (#3)
    by RonK Seattle on Mon Mar 23, 2009 at 08:21:52 PM EST
    Ben Smith, Politico

    Time for an Open Thread (none / 0) (#4)
    by Big Tent Democrat on Mon Mar 23, 2009 at 08:23:02 PM EST
    I think such a tax (5.00 / 3) (#9)
    by standingup on Mon Mar 23, 2009 at 09:18:33 PM EST
    would be met with heavy opposition from small community banks.  They are already very upset with the extra burden put on them by the FDIC's increased fees and one time emergency fee to replenish it's insurance fund.  

    Okay (none / 0) (#1)
    by Ga6thDem on Mon Mar 23, 2009 at 08:18:18 PM EST
    so it won't save the banks either and will punish the good banks perhaps making the situation worse albeit cheaper on the taxpayer is the message I see here.

    Sounds like it (none / 0) (#2)
    by Big Tent Democrat on Mon Mar 23, 2009 at 08:19:27 PM EST
    Let me put it this way, if that was the plan, I would like it better than the plan Geithner has now.

    Parent
    Well (5.00 / 1) (#5)
    by Ga6thDem on Mon Mar 23, 2009 at 08:23:37 PM EST
    that's not saying a lot for the Geither plan now is it? I guess the only advantage to this plan would be if the banks are going to fail then at least the taxpayers have less of an investment in it.

    It just defies reason to me why anyone would want to put forth something that the majority of people think will fail. Maybe he just wants to take care of his cronies on the taxpayers dime and really doesn't care whether it works or not. It's just beyond me that everyone seems to determined to repeat failure.

    Parent

    Well (5.00 / 1) (#6)
    by Big Tent Democrat on Mon Mar 23, 2009 at 08:24:45 PM EST
    I detest the Geithner Plan so that is hardly surprising.

    Parent
    You and (none / 0) (#7)
    by Ga6thDem on Mon Mar 23, 2009 at 08:25:57 PM EST
    almost everybody else it seems.

    Parent