“Taxation without representation.” A senior banker invoked the rallying cry of the American revolution to condemn the Obama administration’s decision to charge a proposed new bank levy on the US subsidiaries of foreign financial groups.

None of the many overseas banks with offices in New York, which include big names in global finance such as Credit Suisse, Deutsche Bank, UBS and BNP Paribas, wanted to publicly criticise the move. But in private many executives were seething.

In their view, asking foreign banks, which did not directly benefit from US government assistance, to pay a levy that is set to raise at least $90bn over the next decade, was fundamentally unfair.

“No one in the list of 50 banks that are affected by this could argue that they did not benefit from government assistance, either directly or indirectly,” admitted one big European bank. “But the way the levy is structured is not equitable. There is no distinction between a Citigroup or Bank of America, which took serious amounts of government money, and others like us, which only benefited indirectly.”

To add insult to injury – at least in the eyes of foreign bankers – the proposed fee would partly go to pay for losses the US government will incur after bailing out companies such as the Detroit carmakers and mortgage financiers Fannie Mae and Freddie Mac.

Administration officials countered that foreign banks based in the US benefited from the rebound in capital markets and economic recovery that followed the disbursement of hundreds of billions of dollars in taxpayers’ funds.

In fact, some analysts welcomed the inclusion of the foreign banks in the list of 50 or so companies that will be charged with the “Financial Crisis Responsibility Fee” because it will reduce the burden on domestic institutions.

“US firms will not be at a competitive disadvantage to the US units of foreign banks,” wrote Jaret Seiberg at Concept Capital, a Washington-based research group.

Such arguments found little sympathy with executives of foreign banks. One noted that the overall benefits of the US government intervention in the markets had also been felt by hedge funds and private equity groups that have not been asked to pay for the levy.

According to analysis by researchers at Morgan Stanley, Barclays Capital will be among the hardest hit foreign banks with a projected levy of $560m a year.

Other banks expected to be hit with charges of a similar scale include HSBC, Deutsche Bank, Credit Suisse and UBS. French banks BNP and Société Générale have smaller

Some foreign banks that are towards the lower end of those caught by the $50bn balance sheet threshold for the levy say they could well seek to shrink and duck out of qualifying.

All banks are convinced that the wider economy will be hit as a consequence.

Additional reporting by Brooke Masters

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