President Barack Obama today is proposing a Financial Crisis Responsibility Fee to be imposed on the remaining debt of the largest financial firms until taxpayers are fully repaid for the Wall Street bailout.
The fee will be in place at least 10 years, but even longer if needed to pay back every penny of the Troubled Assets Relief Program (TARP). Small banks will pay nothing; only firms with more than $50 billion in assets – about 50 or so – will pay, and the White House projects about 60 percent of the revenue will come from the 10 largest firms.
Gene Sperling, counselor to Treasury Secretary Tim Geithner, told reporters on a conference call this morning that the fee’s goal is to ensure banks saved by TARP take responsibility so taxpayers suffer no expansion of the federal debt as a result.
“It is not plausible for these major financial institutions to suggest that they can afford excessive, multimillion- or even multibillion-dollar bonus pools for their top executives but can not afford to make whole the taxpayers who funded the policies that helped them survive this exceptional financial crisis,” Sperling said, noting the TARP legislation actually required the President to put forth a plan by 2013 to recoup any outstanding money from the program.
Sperling said a year ago, people feared taxpayers would lose most of the $700 billion committed to TARP. But banks began repaying, and by August, that projection was down to a loss of $341 billion; now it’s somewhere between $90 billion and $117 billion, and he estimated a decade worth of this fee would raise about $90 billion.
The Republican National Committee issued a memo this morning complaining both that some of the largest banks – including J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Wells Fargo and Citi – already have repaid their TARP debts, and that banks could pass this new cost along to customers through lower interest payments on savings and in other ways. Said RNC Chairman Michael Steele:
“President Obama’s plans to institute a ‘financial crisis responsibility fee’ to recoup the bailout funds from major banks is nothing more than another tax on the American public. The fact is this money has already been paid back by the banks and this punitive tax will hurt Americans’ savings and discourage job creation at the worse of economic times. However, it will fatten the wallets of Democrats on Capitol Hill by $90 billion over the next ten years. President Obama and Congressional Democrats are taxing banks for the same reason Willie Sutton robbed them – because that’s where the money is, and they desperately need these funds to finance their runaway binge spending for their liberal agenda.”
But Sperling said “nothing will be good enough until the taxpayer has been paid back every penny,” and banks that hike customer fees and lower interest rates to compensate for this fee would be doing so “to their own disadvantage,” discouraging customers from doing business with them.