Bank Taxes, GM, and Chrysler

Today's story is "Obama to Unveil Proposal on Bank Taxes"  from the WSJ, regarding taxes/fees the Administration will assess to the big financial firms.

"If approved by Congress, the new tax -- which the White House calls a "financial crisis responsibility fee" -- would force about 50 banks, insurance companies and large broker-dealers to collectively pay the federal government roughly $90 billion over 10 years. Of the 50, about 35 would be U.S. companies and 10 to 15 would be U.S. subsidiaries of foreign financial firms.A senior administration official said the largest 10 institutions would pay about 60% of the tax's total cost."

I just want to focus on one quote from the article:

"The taxed firms are expected to pay the cost of bailout money that went to General Motors Co. and Chrysler LLC, which are exempt from the tax. The administration official defended the omission by contending that U.S. auto makers collapsed in part because of a financial crisis of the banks' making."

Wow - talk about a mis-statement of the truth.  That statement could be rewritten as follows:

"U.S. auto makers collapsed in part because of a financial crisis of their own banks' making."

or

"U.S. auto makers would have collapsed sooner if not for a massive credit bubble driven by low interest rates"

or, as my friend Ted put it:

"U.S. auto makers collapsed because they've made shitty cars for decades and overpromised benefits to unions." 

Blaming the collapse of the automakers on the banks ignores the fact that before there was the bust there was a boom!  Automakers didn't collapse in the early part of the 21st century because the Fed fueled a new bubble in the wake of the collapsing internet bubble.  If we'd never had a credit bubble (and subsequent bust,)  the auto companies would have faced their day of reckoning years ago.

-KD