House Passes 90% Tax on Bonuses

As a wise man once said about being married, "each day is better than the next." That's a bit how I feel about the collective common sense in Washington these days.

With the passing of the 90% tax on bonuses to employees of companies receiving at least $5 billion in TARP funds, Congress has just made it an absolute priority to return the capital to the government, which defeats the entire purpose of the program. This will inevitably make many taxpayers feel good - no more "bailout" funds at banks. Of course, thus far the federal government is earning 5% over its cost of funds, plus warrants, which effectively gives it an approximately 8-10% rate of return on its $800 billion investment. That's an extra $60-80 billion in revenue for the government to spend.

Now, the only banks who will keep the funds are those that absolutely need it (i.e. Citi), which means the likelihood of losing money (while still minimal) just increased.

Oh, and if that means that banks will slow down lending to preserve any loss of the additional TARP capital cushion, then it will do so. And guess who loses? Not the banks...