WASHINGTON, DC – At a hearing of the Senate Finance Committee today, U.S. Senator Pat Roberts said the proposal to tax banks to recoup losses from the Troubled Assets Relief Program (TARP) could harm small businesses and pass on the costs to consumers.

 Senator Roberts directed the following concerns to the Committee’s witness, U.S. Department of the Treasury Secretary Timothy Geithner:

 “It will come as no surprise that I have serious concerns about this proposed bank tax and its potential impact on consumers and small businesses.

 “While I understand that the tax is targeted at large financial institutions – to quote Willie Sutton – ‘because that’s where the money is’ – I am not convinced that this tax will not ultimately harm small businesses through higher costs for borrowing or reduced access to credit, or that the tax will not be passed on to and paid by consumers.

 “By some estimates, a bank tax could remove up to $1 trillion in lending. I have concerns that removing this capital from the system reduces lending to consumers and small businesses and slows economic recovery.”

 Senator Roberts is a member of the Senate Finance Committee. He opposed the Emergency Economic Stabilization Act approved by Congress in 2008 that created the TARP to provide up to $700 billion to financial institutions. One of the key concerns Senator Roberts raised at the time was that it was not clear that the plan would get the job done, nor that there was sufficient transparency or oversight of the act, or requirements about how the funds would be spent. Since the passage of TARP, the program has expanded to provide assistance for automakers and housing programs, in addition to the assistance provided to financial institutions.

 The TARP law includes a provision requiring that in 2013 the administration put forth a plan to recoup any shortfall to ensure that the TARP does not add to the deficit or national debt. A number of financial institutions have already repaid the funds they received through TARP.

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