New Bank Tax Part IV: The Markets Don't Like It

In this last post in a four-part series on the new $90 billion tax on banks proposed by the Obama Administration, we show that the markets hate this idea. If our arguments about this tax increasing the cost of credit, slowing lending, and hitting community banks haven't convinced you, then consider this:

When the news of the tax was reported in the financial press, the KBW bank stock index fell by 1.70 percent on that day. On a market adjusted basis, the index declined by 0.76 percent.*

For the 24 large cap banks in the index, twenty posted a negative daily return on January 12, as shareholder wealth declined by $16.44 billion. Including both Goldman Sachs and Morgan Stanley, the Administration’s proposed fee destroyed almost $20 billion in shareholder value in one day.

Also see:

• Part I: Increases the Cost of Credit
  
• Part II: Reducing Capital Hinders Lending
• Part III: Community Banks Not Immune

* Market adjusted return subtracts the daily return of the S&P 500 from the daily return of a company’s stock or index.