Government

A $19 Billion Bank Tax May Get Axed

Update: They got rid of the tax. Instead, TARP will be wound down early, and fees for the FDIC's fund will be increased. Here's more from the WSJ.

In an unusual move, Congressional Dems are re-opening negotiations today on the finance-reform bill.

The sticking point: A $19 billion tax on big banks and hedge funds. It was added at the last minute to pay for the costs of implementing the bill.

The Democrats are likely to "swap out" the tax in order to win the support of Scott Brown, a Republican, Politico reports.

One alternative would be to claim unused TARP funds, the WSJ says.

That $19 billion figure came from a CBO estimate of the cost of the bill.

Some provisions in the bill would raise revenues for the government. Some would raise costs. On balance, the CBO figured, the costs would outstrip the revenues by about $19 billion over the next decade, largely due to unrecovered costs of shutting down failing financial firms.

But the CBO report emphasized that its estimate was really rough. Nobody knows what financial firms are going to fail or how much it's going to cost to unwind them.

As the CBO said:

Although the estimate reflects CBO’s best judgment on the basis of historical experience, the cost of the program would depend on future economic and financial events that are inherently unpredictable. ...

All told, actual spending and assessments in each year would probably vary significantly from the estimated amounts.

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