The bank fee proposal that President Obama is bringing back to life with his State of the Union address on Tuesday night aims to rebalance a sense of fairness by requiring the banking industry, which fueled the 2008 financial crisis, to assist a struggling middle class who is paying for it now.
The president is calling for taxing banks, to defray the cost of refinancing “responsible” homeowners, who are current on their loans, into lower interest rates to save $3,000 a year.
On its surface it is a brilliant double whammy. It forces Republicans who oppose it to look like the defenders of Wall Street and lets Obama shift some of the blame for the poor state of the real estate market to Congress for failing to act.
The flaw in this strategy is that the proposal is dead on arrival and the Obama administration knows that, which makes it clear the goal is more about gaining something to campaign on than affecting change.
Bankers will still whoop and holler to kill it but they have little to worry about.
When the administration first proposed a “financial crisis responsibility fee” in January 2010, the outrage against the banks for the $700 billion bailout was burning hot and came in a climate where members were clamoring to beat up on them.
Despite that anger, a Democratic-controlled House and Senate failed to pass the measure and in fact stripped it out of Dodd-Frank financial reform during the wee hours of its conference committee negotiations.
The administration again proposed a version of the fee in its budget last year – totaling $30 billion - a third of what it had proposed in 2010 -- but did little to push it and the initiative died quietly. In this election year Wall Street can bet on the same.