US President Barack Obama unveiled a new fee to recover the billions of taxpayers' dollars spent on rescuing Wall Street firms in the recent financial crisis. Obama also railed against the culture of fat bonuses in the finance industry.
AFP - President Barack Obama on Thursday proposed a new fee on major banking firms to recover "every single dime" taxpayers shelled out to rescue Wall Street from the economic crisis.
The plan, if approved by Congress, would raise 90 billion dollars from 50 big financial institutions, including foreign banks operating in the United States, under an effort to recoup money from a massive bailout of the banking sector.
Obama said the move is aimed at preventing Wall Street firms from going back to business as usual and resuming high-risk lending practices and huge bets on mortgages and other instruments he blames for igniting the financial crisis.
"My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people," Obama said.
The new plan, already attracting opposition from the finance industry, was rolled out as the sector gears up to announce huge bonuses for top executives, which has inflamed the public as Americans face 10 percent unemployment and deep economic misery.
The title of the initiative, the "Financial Crisis Responsibility Fee," makes it clear the administration is placing blame on the financial industry for the worst economic meltdown since the 1930s Great Depression.
Yet Valerie Jarrett, a senior adviser to the president, insisted that "we're not trying to pick a fight" with banks.
"It's a very solid solution to make sure taxpayers are made whole," she told MSNBC television.
The Obama administration has repeatedly said it would try to recoup the full cost of the 700-billion-dollar Troubled Asset Relief Program (TARP) which was used to bail out banks, and also tapped to aid crippled automakers.
A senior US official said the program, which has seen some money already paid back, would now effectively leave the government around 117 billion dollars out of pocket.
"It is in many ways offensive for those at our major financial institutions to suggest they can today afford excessive, often outlandish bonuses for their top executives" but cannot repay taxpayers, the official said.
But the Financial Services Roundtable, which represents 100 top financial services firms, said the fee was "strictly political."
"Two-thirds of the TARP investment from banks has already been repaid with a large profit to the taxpayer," said the Roundtable's president and chief executive Steve Bartlett.
"This proposed tax will do nothing more than stifle economic recovery and encumber more pressing concerns, such as covering new regulatory costs."
The administration's proposal, which requires congressional approval, will apply only to firms with over 50 billion dollars in assets, applying a fee of 0.15 percent of liabilities of the companies.
It will cover around 50 firms, including 35 that are US-based and 10 to 15 which are US subsidies of foreign companies. It will last 10 years or as long as necessary to recoup losses under TARP.
No small or community banks would be covered by the plan.
Even though auto firms General Motors and Chrysler also got money from the TARP fund, they will not have to pay the fee, officials said.
According to a Treasury report to Congress published on Monday, the government had committed 545 billion dollars of TARP funds as of January 6.
Of that figure, 372 billion dollars have been disbursed. Banks have already repaid 165.18 billion dollars of those funds, leaving 209 billion dollars outstanding.
Date created : 2010-01-14