The Effects of the Mere Possibility of a
Bank Tax on Your 401(k)
By Noreen Alladina
•
Friday, January 29, 2010 5:35 pm
On Thursday January 14th, President Obama announced his proposal for a tax on banks in order to recuperate the money spent on bailouts and the stimulus package. The following Monday, the stock market began a week filled with losses and down arrows. Let’s examine the closing prices of the Vanguard 500 Index Fund (the largest mutual fund that mirrors the performance of the S&P 500 index) to see how the bank tax announcement fared on the stock market.
The chart below lists the date, the adjusted closing price, and the amount of money one would have if they invested $10,000, $50,000, or $100,000 in this mutual fund.
| Date |
Adj. Closing Price |
$10,000 |
$50,000 |
$100,000 |
|
19-Jan-10 |
105.97 |
$10,000 |
$50,000 |
$100,000 |
|
20-Jan- 10 |
104.86 |
$9,895.25 |
$49,476.27 |
$98,952.53 |
| 21-Jan-10 |
102.88 |
$9,708.40 |
$48,452.05 |
$97,084.08 |
| 22-Jan-10 |
100.6 |
$9,493.25 |
$47,466.27 |
$94,932.53 |
| 25-Jan-10 |
101.06 |
$9,536.66 |
$47,683.31 |
$95,366.61 |
| 26-Jan-10 |
100.64 |
$9,497.02 |
$47,485.14 |
$94,970.27 |
| 27-Jan-10 |
101.14 |
$9,544.21 |
$47,721.06 |
$95,442.11 |
| 28-Jan-10 |
99.95 |
$9,431.91 |
$47,159.58 |
$94,319.15 |
From the beginning of the week to the end, someone who invested $10,000 would have lost $568.08. Someone who had $100,000 of their 401(k) invested would have lost over $5,680. I would say this is a pretty significant loss. If this is the loss from the week following simply just an announcement of a possible bank tax, what will happen to the stock market if a bank tax actually makes its way through Congress?
On January 16th, Obama asserted, "Like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect.” Well, it seems that the stock market is the one currently doing the convincing.
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