No one likes the idea of filthy rich banks getting a leg up from the government, not even Republicans. And a small but growing contingent within the party is aligning with populists to strip big banks of the benefits they receive from the implicit guarantee that the government will always come to their rescue.
Rep. Dave Camp (R-Mich.) took the latest shot this week by proposing a levy on megabanks in his long-awaited tax plan. Camp, chairman of the House Ways and Means Committee, is calling for any firm designated as "systemically important" under the Dodd-Frank financial reform law to pay a quarterly tax equal to 0.035 percent of their total consolidated assets in excess of $500 billion. The tax, which would take effect in January 2015, would generate an estimated $86.4 billion in 10 years.
The idea here is to force Wall Street giants, such as JPMorgan Chase, Citibank and Goldman Sachs, to "reimburse the American taxpayer for a portion of the subsidy" they receive, according to the summary of the bill.
“Dodd-Frank allows these big banks and financial institutions to pay lower borrowing costs, with the difference left to be made up by the American taxpayer,” the summary said.
This sounds a whole lot like the argument made by Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.), who proposed legislation in April to force big banks to hold capital equal to 15 percent of their assets -- enough of a cushion to absorb losses without the help of the government.
"Eliminating the megabanks federal handouts is a simple matter of common sense," Vitter recently said. "Megabanks have been growing at a rapid pace since the financial meltdown, largely on the backs of U.S. taxpayers."
Neither Vitter nor Camp could be considered liberal sympathizers. Rather, their interests in ending big bank subsidies center on a key Republican tenet of protecting the free-market economy. Subsidies create market distortions that fly in the face of that tenet.
Still, a vast majority of Republicans are unlikely to jump on the too-big-to-fail bandwagon. The securities and investment industry pumps millions of dollars into the party's coffers, handing $3.5 million to the National Republican Congressional Committee this election cycle, according to Center for Responsive Politics.
With this being an election year, few members of Congress will be willing to put their neck out for a tax bill that has a slim chance of passing. But even if Camp's bill doesn't make it out of committee, it lends more credibility to the argument that no banks should benefit from the government's largesse.