The Columbus Dispatch is reporting that Governor Kasich, reaching back to his Lehman Brothers’ roots, wants to give banks a tax break to encourage lending:

Kasich, a former executive at Lehman Brothers, suggested yesterday that altering the tax could reduce costs for banks and generate more loans.

We need to cut taxes so we can encourage banks to make loans is like saying we need to cut taxes to encourage me to draft contracts or file lawsuits.  I don’t need a tax cut to do my business model, neither do banks.

Despite what you may believe as a result of millions, if not billions, in marketing, banks are not designed to be your friend who wears a casual polo shirt while you fly model airplanes or give kids ice cream.

Kasich Housing BubbleBanks make money because of lending.  A bank that isn’t lending isn’t a bank.  Why do some checking accounts offer better interest rates?  Because those accounts require a certain level of deposits that the bank can leverage for… more lending.  Where does the interest come from?  It’s the cut of what the bank is willing to give you for the money it made from… lending your deposits out. 

Seriously, banks don’t need tax cuts to get them to lend.  It’s what they do… by definition.

Not even a bank industry representative could stay on the same page as the Administration as to why this tax cut (which Kasich’s budget doesn’t account for) would be beneficial:

"That money could be put into the stakeholders’ pockets, which they would spend and continue to drive the economy," [Bob Palmer, president and CEO of the Community Bankers Association of Ohio] said.

In other words, the money saved from any tax cut won’t stimulate more lending activity in the financial sector, but may have a stimulative effect when it allows us to pay larger dividends to our shareholders.  U.S. Bank, one of the largest banks in the nation, is presently paying $.13 in dividends per common share stock.  Kasich’s tax cut probably wouldn’t have beyond a negligible impact on its dividends.  In other words, as an economic stimulator, Kasich’s proposed tax cut is a total bust.

And why else does Kasich think that the banks need this tax cut?

"I mean, taxing people on the basis of net worth instead of net income is something that’s not all that appealing to me," Kasich told about 300 bank executives at the Ohio Bankers’ Day Conference at the Crowne Plaza Columbus North.

Which is odd since this statement would, seemingly, put Kasich’s odds as to his official position on how the State’s Commercial Activities Tax (CAT) should be applied to the gross and not net receipts of the casinos.

When even the industry’s own insiders cannot justify the Governor’s case for giving them a major tax break, it’s over.  This isn’t a debate worth Ohio having.  Seriously, someone please tell the Governor to stop spouting off at the mouth every half-baked idea he’s every had.

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  • Annekarima

    Hmmm…I saw this one coming after watching Inside Job from Netflix last night.  Took Netflix months to get this one to me.  Popular demand I guess.  Next time Kasich and the koolkids decide to show SuperMensch, maybe someone could do a private showing of Inside Job.  Might learn something valuable.

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