Scott Brown's Strange Populism

There is a theater-of-the-ironic element in Scott Brown's "victory" on the bank tax. He successfully removed from the financial bill a $19 billion tax on banks with more than $50 billion in assets and on hedge funds with $10 billion or more. Instead, about half the revenue to pay for reform will come from a stealth tax -- in the form of higher FDIC deposit insurance premiums. (The required ratio of cash to expected exposure will increase 20 basis points from 1.15 percent to 1.35 percent.)

One key banking lobbyist told me that "the net effect is the same ... this is a fixed cost and it could mean higher fees or fewer loans." It also will hit a much larger group of banks. The old tax would have targeted just the mega-institutions that played the biggest role in making the financial mess. The new stealth tax socks all banks with $10 billion or more in assets -- many of which avoided irresponsible lending practices and fancy investment instruments -- charging them $5.7 billion in higher premiums. (Because more banks pay, the huge banks get away with paying less.) Even though the policy will not go into full effect for ten years, costs could rise much sooner -- at a time when all banks are under greater pressure than ever to make more loans and get credit flowing again. And hedge funds seem to be spared any new tax at all.

So Scott Brown the populist crusader, the protector of the middle class, the most popular politician in Massachusetts, has pushed a policy that probably means lower taxes for Wall Street, higher premiums for Main Street banks, and less lending to small businesses.