Obama wants big banks to pay for bailout fund with new tax
Source: Agencies |
January 15, 2010, Friday
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Print Edition
Print Edition
MINDFUL of soaring deficits and an anti-Wall Street mood, United States President Barack Obama wants a new 10-year tax on the United States' largest banks to cover a projected US$117 billion shortfall in the government's financial crisis bailout fund.
The president plans to propose a levy of 15 basis points, or 0.15 percent, on the liabilities of large financial institutions to make sure every dollar spent from the US$700 billion Troubled Asset Relief Program to rescue Wall Street firms, auto companies and mortgage holders is either repaid or paid for. Congress would have to approve the tax.
A senior administration official said the tax, which officials are calling a "financial crisis responsibility fee," would apply only to financial companies with assets of more than US$50 billion. Those firms - estimated to amount to about 50 institutions - would have to pay the fee even though many did not accept any taxpayer assistance and most others already paid back their government infusions.
The official said banks could pay for the tax by tapping their generous executive bonus pools. The administration official described the plan in a conference call to reporters on Wednesday evening on the condition of anonymity because it had not been officially announced.
Insurance conglomerate American International Group, the largest beneficiary with nearly US$70 billion in bailouts, would have to pay the tax. But General Motors Co and Chrysler Group LLC - whose US$66 billion in government loans are not expected to be fully repaid - would not be subject to a tax.
Bankers did not hide their objections.
"Politics have overtaken the economics," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, a group representing large Wall Street institutions.
"This is a punitive tax on companies that repaid TARP in full or never took TARP."
The president plans to propose a levy of 15 basis points, or 0.15 percent, on the liabilities of large financial institutions to make sure every dollar spent from the US$700 billion Troubled Asset Relief Program to rescue Wall Street firms, auto companies and mortgage holders is either repaid or paid for. Congress would have to approve the tax.
A senior administration official said the tax, which officials are calling a "financial crisis responsibility fee," would apply only to financial companies with assets of more than US$50 billion. Those firms - estimated to amount to about 50 institutions - would have to pay the fee even though many did not accept any taxpayer assistance and most others already paid back their government infusions.
The official said banks could pay for the tax by tapping their generous executive bonus pools. The administration official described the plan in a conference call to reporters on Wednesday evening on the condition of anonymity because it had not been officially announced.
Insurance conglomerate American International Group, the largest beneficiary with nearly US$70 billion in bailouts, would have to pay the tax. But General Motors Co and Chrysler Group LLC - whose US$66 billion in government loans are not expected to be fully repaid - would not be subject to a tax.
Bankers did not hide their objections.
"Politics have overtaken the economics," said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, a group representing large Wall Street institutions.
"This is a punitive tax on companies that repaid TARP in full or never took TARP."
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