Geithner: A bank tax based on profit would be less effective

Treasury Secretary Timothy Geithner on Tuesday said a bank tax based on profit would not accomplish President Obama's primary goal of creating a tax that would stop banks from taking extraordinary risks. 

"We did look at a profits tax, as well as a financial transaction tax, but we thought this [Obama's proposal] was a better design because it would have the additional benefit of not just covering losses from TARP, but it would help reinforce our broader objective of limiting risk-taking," Geithner said. "A profits tax would not do that." 

The Secretary's comment came during a Senate Finance Committee hearing on creating a bank tax. 

Obama's proposal essentially places a tax on larger financial firms whose portfolios regulators determine are too risky. 

House tax-writers are supposedly looking to base their bank tax on profits, according to Senate Finance Chairman Max Baucus (D-Mont.).