Capital would not be limited by bank tax, Geithner said

Senate Finance members from both parties on Tuesday repeatedly questioned a notion espoused by Treasury Secretary Timothy Geithner that the availability of credit, such as to start-up companies or individuals, would not be restricted by the bank tax. 

Geithner argued that most institutions serving small businesses and individuals would not subjected to the tax. He also said that institutions subjected to the levy would likely lose customers if they passed the cost of the tax on to end users. 

"The other more than 99 percent of the American financial system that is not covered by the tax would be able to come in and take that business away," Geithner said. 

Sen. John Kerry (D-Mass.) countered the Secretary's rationale by noting a report from the Congressional Budget Office that found that the availability of credit would be restricted by creating a tax on banks that take extraordinary risks.  

"I'm concerned that however it works in practice it may not be that clean cut," Kerry said. "And the result could be that small business [loans] may have an impact." 

Sen. Pat Roberts (R-Kan.) said one study estimates that a tax on banks would reduce the amount of capital for loans by $1 trillion.