Tuesday, January 12, 2010

Tax On Banks: We've Seen This Movie Before

Bank stocks are swooning on the heels of a report that the Obama administration is mulling a new tax on big banks that will help pay for the financial bailout.  Yet again, another case of politicians attempting to curry favor by sticking it to the 'big guys.'  A couple of years ago, we were hearing cries for a tax on 'Big Oil.' Whatever happened to that?  Then it was taxes on 'Big Pharma.'  Last summer it was new taxes and regulations on 'Big Health Insurers.' 

In each instance, the declines caused by the headline mongering cretins in Washington  turned out to be nothing more than opportunities to pick up quality companies at temporarily reduced prices.  The same will likely be true in the case of big bank stocks.

Why is this? Two reasons: First--and I can't believe politicians STILL do not get this--corporations do not get hurt by these punitive taxes; they merely pass the costs along to the consumer.  Second, after the puffed up pols get their ten minutes of air time, these proposals tend to get quietly watered down or killed behind closed doors.  When push comes to shove, no one up for reelection--Republican or Democrat--is likely to bite too harshly the hand that feeds the insatiable appetite of campaign costs.

I hate to sound so cynical, but it is what it is.  Just wait and see.  This is a movie we've seen before.

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