Geithner urges Senate to support bank tax

Treasury Secretary Timothy Geithner on Tuesday urged lawmakers to include the bank tax proposed by President Obama in the Senate’s financial reform bill

Geithner said the tax would only hit a small fraction of banks. He also argued that banks would be unlikely to pass that tax on to their customers for fear of losing market share.

“The fee excludes over 99 percent of U.S. banks, which currently provide the majority of small loans to businesses and farms across the country,” Geithner said in prepared testimony to the Senate Finance Committee.

“If covered firms try to pass on the costs of the fee to their borrowers, they will lose market share to other institutions,” he continued.

“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. 

The Senate is resuming debate on the financial reform legislation on Tuesday. The legislation at present does not include the tax proposed by Obama.

Geithner said the bill would be complemented by the fee. Overall, he said, the reforms in the legislation would better protect families and businesses.

Geithner came under some tough questioning from panel members in both parties who asked whether the tax could restrict the availability of credit to start-up companies or individuals.

Sen. John Kerry (D-Mass.) noted a Congressional Budget Office report that found that the availability of credit would be restricted by creating a tax on banks that take extraordinary risks.  

He suggested that could ultimately affect small businesses.

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.

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