Sen. Orrin Hatch says proposed tax on big banks is unfair

WASHINGTON — Sen. Orrin Hatch told Treasury Secretary Timothy Geithner on Tuesday that he thinks a proposed tax on big banks to pay for bailouts is unfair because some banks that did not cause problems are included, and auto makers who benefitted from bailouts would escape it.

"It isn't fair to everyone," Hatch, R-Utah, told Geithner in a Senate Finance Committee hearing.

That tax-writing committee has been considering an Obama administration proposal to assess a fee of 0.15 percent on the liabilities (other than deposits and certain required capital holdings) of financial institutions that have more than $50 billion in assets.

"Is it fair to apply this tax not only to companies that have repaid TARP (Troubled Asset Relief Program) with interest, but also to companies that did not take TARP money at all?" Hatch asked.

Geithner said, "We thought the fairest way to do this was to apply the fee to firms that contributed most to the crisis and who were eligible for these programs," and acknowledged it would include some that never took TARP money. "It's not going to seem fair to everyone, and there's no perfectly fair approach."

Hatch also questioned why Freddie Mac and Fannie Mae were not included, saying their failures on housing loans helped cause the recession.

"It would be one hand of government paying the other," Geithner said, explaining that the government has put those quasi public bodies into a form of conservatorship that he believes would make the federal government end up paying such a tax if it imposed it on them.

Hatch also questions why General Motors and Chrysler were not included in such tax proposals since they benefitted from government bailouts.

Geithner said, "Despite the many mistakes they made over time in managing those businesses, they did not cause this financial crisis. Their challenges were made substantially worse by this financial crisis."

Hatch responded, "There's a lot of banks out there that didn't cause this crisis that will be stung by this fee."

Also at the hearing, ranking Republican Charles Grassley said he worried Democrats may try to use money from the proposed tax to pay for other bills they want, and not just for the bank bailout. He attempted to get Geithner to vow to push for a veto if that happens.

Geithner sidestepped the veto question, but said that he and President Barack Obama feel strongly that money from the proposed tax "should go to reduce the deficit."

This story was reported from Salt Lake City.

e-mail: lee@desnews.com