President Obama now wants a windfall profits tax assessed against the nation's top 20 to 30 banks to cover the estimated $120 billion in projected TARP losses, costs largely incurred from bailing out the failed insurer AIG, the automakers, and bad borrowers.

So which banks could be hit with the new “cash for flunkers” tax, by how much, and will it really raise tax revenues to cut down the deficit? Or will consumers have to pick up the tab?

Let's be real, this is a tax proposal that consumers or investors will have to pay for; a tax assessed against banks will get passed onto borrowers in the form of higher fees, or to investors, depending on what form it takes. Many of the banks that could be assessed have already repaid TARP with interest.

Bankers say to expect loan availability to shrink and stock trades to get hurt, too, if it passes.

And bankers could pull stakes and set up shop in less onerous tax regimes, hurting jobs in the financial sector even more.

The Treasury says it lost a net $68.5  billion on TARP in the year ending September 2009. Taxpayers have lost $30.4 billion on AIG, $30.4 billion on the automakers, and $27.1 billion on the government's new Home Affordable Modification Program.

Which Banks Get Taxed? 

Bank lobby groups are already saying borrowers will have to pay the fee, and they're crunching the numbers (see below). Bank of America (BAC), JPMorgan Chase (JPM) and Citibank (C) could each pay about $20 billion for this "cash for flunkers" tax.

So now you have yet another political iteration of the TARP tax aimed at the banks to pay for the deficit. A tax which President Obamainitially suggested at a night-time press conference last July as a way to pay for a new slush fund to wind down too-big-to-fail banks (see column,"Why a Tax On Wall Street to Create Jobs Won't Work").

The tax then morphed into a job creation-deficit-buster tax, now resurfacing as the levy to pay for taxpayer losses at the failed insurer AIG and the automakers, and to ostensibly pay down the deficit, the size of which has not been seen since World War II, as the government and the Federal Reserve have bought or financed about three-quarters of the U.S.'s annual GDP to rescue the banks and the economy.

Bankers a No Show

Whether the president can slap a TARP tax against the banks when the Administration can't get bankers to attend meetings at the White House remains to be seen. Heated banker opposition to the tax is already picking up, as the White House plans to include the tax in its upcoming budget proposals.

To date, there is no talk of a tax on banker bonuses. Another political trial balloon was floated this week when a potential quarter percentage point tax on securities trades was resurrected once again, likely targeting flash trades made by high-speed computers on Wall Street. Too much opposition there, as even the Treasury secretary Tim Geithner says those taxes will just get passed along to investors.

Banks Say Consumers Will Get Hurt

Banks are already passing along to consumers higher fees to compensate for higher costs incurred by new overdraft and credit card legislation.

The new tax on the banks “will reduce lending capacity and will increase the cost of goods and services,” says Scott Talbott, senior vice president of government affairs at The Financial Services Roundtable, a bank lobby group.

The last time the U.S. saw a windfall profits tax  was in 1980, when the Carter Administration got Congress to slap a windfall profits tax on oil companies to recoup the revenue earned by oil companies as a result of the sharp spike in oil prices triggered by the OPEC oil embargo.

Gorillas in Three-Piece Bankers Suits 

To be sure, a gorilla in a three-piece banker's suit could make money in this environment. The Federal Reserve has dropped rates to record lows, helping banks to borrow cheaply and then lend out that money at higher prices, known as the “carry trade,” a profit machine motoring along nicely due to the steep yield curve.

The government also forced through a relaxation of the mark-to-market rules, which required banks and companies to take profit hits once they price their assets as if they were going to sell them today, even though they were sitting on them instead. Steep profit smackdowns as many of those assets were, and still are, priced for the Ice Age.

It's political season in DC, with the midterms looming, and bankers are in season. It's payback time.

Lip Service to Deficit Cutting 

But despite the lip service paid toward cutting the deficit, rest assured that cutting the deficit would be last on the government's list of things to do once the revenue from a cash for flunkers tax comes pouring in, because there will always be more spending, more talk of more taxes, more spending, more pork to be found to preserve power, more regulation to control our lives.

More, more, more to keep our teetering, supersize-me government going.

Because fiscally responsible politicians are an endangered species in Washington.

Who Gets Socked? 

Research groups Concept Capital and SNL Financial have come up with a breakdown of a purported $100 billion cost of the TARP tax for the nation's top 25 largest banks, as reported by Barnes. In other words, how much their borrowers and investors could get hit.

The two research firms figure the tax would be based on a bank's total liabilities. That means it would be similar to the deposit insurance assessment. The two firms note that the House financial reform bill includes a similar assessment to raise $200 billion to cover potential future rescues.

TARP Tax Costs to Banks (25 Largest Banks)

Bank of America $22.7 B  

JPMorgan Chase $21.4 B

Citigroup $19.9 B

Wells Fargo $12.5 B

PNC Financial Services $2.7 B

U.S. Bancorp $2.7 B

Bank of New York Mellon $2.1 B 

SunTrust Banks $1.7 B  

Capital One Financial $1.6 B

BB&T Corp. $1.7 B 

State Street $1.7 B 

Regions Financial $1.4 B 

Fifth Third $1.1 B 

KeyCorp $978 M 

Northern Trust $817 M

M&T Bank $699.8 M

Comerica $601 M 

Hudson City Bancorp $614 M

Marshall & Ilsley $595.8 M 

Zions Bancorp $546.1 M

Huntington Bancshares $533.4 M 

Popular $375 M 

Synovus Financial Corp. $358.4 M 

New York Community Bancorp $325.1 M 

First Horizon National $263.3 M

BOK Financial $247.5 M