The bank tax is in, wait it's out. FDIC premiums are increasing instead. Oh, and there are estimations that some large global banks will also pay billions of dollars to implement the new Basel standards. All of this in the name of an economic recovery. But how this will happen with watered down legislation and constrictions on recapitalization is a great big question mark in my mind. The provisions of the Dodd-Frank legislation are a perfect fit for reducing the chance of an exactly similar financial crisis from happening again. Yet, aren't the causes of financial crisis different every time? So in that line of thought, it's fair to say the impact to the broader financial markets will be limited with the bill's passage. Gauging the impact of this and the other aforementioned storm of fee-charging is more of a challenge. For the current recovery to work, more emphasis on recapitalization is needed. Increasing bank lending seems to be on the lips of those pushing financial reform, but not in their hearts and minds. Instead, the real value will come when the bill is passed. Risk retention will likely be at 5% of ABS on balance sheet. According to Capital Economics, the original bank tax stood at nearly $20bn, which is now likely to be raised through additional FDIC fees. According to Jones Lang LaSalle the latest proposals from the Basel Committee (known as Basel III) will require banks to maintain a core capital ratio of 6%, to become strict on their definition of ‘Tier 1’ capital, to meet liquidity coverage ratios, and to reduce the counterparty risk associated with derivatives and repurchase agreements. That's a lot of capital. To put it into perspective, the CEO of Standard Chartered wrote in the Telegraph: "Most banks, including Standard Chartered, have already improved their capital ratios significantly. But we should recognise that increasing capital levels has a real cost as it makes credit both more expensive and less available. Every extra dollar a bank holds in capital equates to at least $15 that it is unable to lend." Make no mistake, banks are still earning more and more. The Bank of International Settlements, which administers Basel, for example recorded a net profit of $2.9bn compared with $688m during the preceding financial year. But that is only a whitewash of the real issue. The FDIC problem list of banks continues to increase, from 702 to 775, a "significant growth" from a year ago, when the number was 305, according to a report by Deloitte. And it's a global problem: the Bank of Spain will use nearly $123bn in capital injections to help restructure a banking sector that heavily financed both residential and commercial property during the credit bubble, JLL said. An interesting sidebar to that JLL report is that "developed" countries -- that is those meant to have established, streamline default solutions for the financial sectors through a strong system of regulations – disproportionately experience downturns compared to "developing" countries. The reason this relationship appears so counterintuitive, is likely based on this twisted logic that economies can recapitalize and recover in an environment of higher fees and stricter rules. And while the nature of the downturns change, the relationship don't according to Joseph Mason when years back the FDIC told banks they’d have to pay higher premiums. "Hence, what was playing out then, and now, was a long-term power struggle, not a short term crisis-related element of reform," he said. And so the parties continue on this long-term power struggle. Meanwhile, Deutsche Bank analyst (and so many others) expect a sharp slowdown in economic activity in the second half of 2010. A large portion of this is due to a stagnation in bank loan growth, particularly in the corporate space. So what does that say? Banks are leaning on earnings to facilitate operations. And with more fees in the pipeline, don't expect bank lending to increase anytime soon. Write to Jacob Gaffney.