"TARP Tax" Coming Today

Today, President Barack Obama is expected to propose his new tax on the nation's largest bank today as public backlash over TARP and giant bank bonuses reaches a crescendo.

The "TARP tax" as it is unofficially known, is being called the "financial crisis responsibility fee" and is expected to be levied on about 50 financial institutions, even those that have paid back TARP. The tax would collect roughly $90 billion over 10 years. The largest 10 institutions would pay about 60% of the fees, according to the Wall Street Journal citing a senior administration official.

Large U.S. banks like Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS), J.P. Morgan Chase (NYSE: JPM), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) would pay a lot of the fees. The tax could also hit companies like General Electric (NYSE: GE), which benefited from the government's debt guarantees.

With TARP repayments, the White House estimates the cost of TARP is about $117 billion, down from the prior estimate of $341 billion. The cost of TARP could ultimately fall to $90 billion, which is about the amount of funds being raised from the new tax.

Analysts at FBR Capital said while the "TARP Tax" makes great headlines it is unlikely to pass the Senate. The firm stated, "Our sources on Capitol Hill indicate that the TARP tax has a very low probability of passage in the Senate, as nearly all Republicans and a sufficient number of Democrats would likely vote against the measure." The firm thinks the tax would likely pass the more populist-driven House.

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