Taxing Banks May Cause Double Dip: Risk Manager

Taxing the banks in Europe and the United States may cause a double-dip recession because there will not be enough money to finance the recovery, Robert Sloan, author of "Don't Blame the Shorts" told CNBC Thursday.

"My personal opinion is that we will (have a double dip in the US). We don't seem to understand that the money comes from the same pool. You put a tax on banks and you want them to lend," Sloan, who is also a managing partner of prime brokerage risk manager S3 Partners, said.

Banks faced public wrath all over the world in the wake of the financial meltdown that has brought on the worse post-war recession.

The UK imposed a 50 percent top rate of tax due to come into force in April, and many bankers and analysts said financials institutions will leave London, undermining the city's competitiveness on the global markets.

On Thursday, President Barack Obama will unveil new measures to tax big banks to cover expected losses from the taxpayer-funded bank bailout known as TARP.

The tax is likely to raise up to $120 billion from major banks but bankers have already voiced their concerns.

"We need to fuel growth. We need leverage back in the system. We need to find a way of putting money back in the system," Sloan told

Many countries resorted to printing money and bailing out financial institutions with state funds in order to avert a depression, and analysts warned that deteriorating fiscal positions may hurt their economies.

Raising taxes is one way in which governments try to claw back funds, but Sloan disagrees that this is the best option.

"It's a question of overspending," he said.

The better course would be to cut government spending to improve fiscal positions rather than raise taxes, as the economy is still fragile, Sloan added.

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