Mark Thoma and Scott Sumner were on Blogging Heads talking about the financial crisis. They seemed to agree that taxing 'excess reserves' of banks was a good idea, because you want to incent lending, and get money flowing to alleviate the liquidity crisis.
However, banks are hoarding cash because they feel they need a bigger cushion. Indeed, the 'stress tests' of Geithner are looking at banks and evaluating whether they have sufficient capital to withstand some hit to their portfolios. Lower levels of capital would make them fail this test, and then they would be taken over.
In 1937 the US implemented a tax on retained earnings, which seemed like a good idea to economically incompetent Roosevelt because he assumed he was just taxing 'money', and unused money at that. The idea was, we wanted to get this money 'working'. Plus, taxes on capital are progressive (good). See here for a 1937 rationale, and note it mentions Henry Ford by name.
The 1937 recession was one of America's worst. Unemployment rose from 5 million to almost 12 million in early 1938. Manufacturing output fell off by 40% from the 1937 peak.
Taxing 'excess bank reserves' is just like taxing retained earnings in this environment. Luckily, Bernanke is very conversant with this episode, and the need for firms to have 'excess' cash.
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