New Tax for Banks? Andrew Ross Sorkin Weighs in on Wall Street’s Reaction

Jan 12, 2010 10:33am

Wall Street is anxious over reports that the White House is contemplating whether to impose a special tax on large banks.

My sources tell me the fee in consideration is likely to be targeted at the biggest banks. It won’t be the tax on bonuses banks are most worried about. Rather, the administration would do some kind of an assessment on the risk banks take.

I spoke to New York Times business reporter Andrew Ross Sorkin on GMA this morning about Wall Street’s reaction to it. Most bankers, he said, were “completely blindsided” by it.

“There was a lack of appreciation that the White House could even contemplate doing something like this,” Sorkin said. Bankers are saying “we paid back the money, we paid it back with interest and so I think that they don’t know what to do.”

The counter argument is that banks made a fortune because they got a low interest rate on TARP, but Wall Street hasn’t quite accepted that argument.

“From the Wall Street perspective, they’re saying, you know there’s a $120 million the Treasury’s probably going to lose on TARP effectively, at the end of the day, and they’re saying to themselves, most of that loss is coming from the automobile makers and from AIG. Why are we going to pay it,” Sorkin said.

“They don’t know what to do. They want to appease the public anger and yet they’re making these enormous profits, and they think that they’re best people are going to walk out,” he added.

There’s still a lot of public anger about hefty executive bonuses. Banks are poised to pay out record bonuses this year and administration officials are not that hopeful they will show much restraint.

“We've provided extraordinary aid, and the — and the idea that, as the financial system heals, they just go back to business as usual is — is simply outrageous,” Dr. Christina Romer, Chair of the White House Council of Economic Advisers, told me on “This Week” Sunday.

Watch the GMA report and my full conversation with Andrew Ross Sorkin here:

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