(Jan. 14) -- President Barack Obama proposed a tax on the nation's largest banks Thursday in a bid to recoup funds spent on the bailouts and capitalize on the spike in public indignation at the bonus culture of Wall Street.
"We want our money back, and we're going to get it," Obama said in unveiling what he called a "financial crisis responsibility fee" aimed at recovering all taxpayer funds spent on the Troubled Asset Relief Program. The president argued that the biggest financial institutions, even those that have already repaid their TARP funds, are now thriving only because of government largess.
The tax, which can only be put into law by Congress, would "be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street," the president said. "If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers." YEAH!!!!!!!
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Obama added that the "goal is not to punish Wall Street firms but rather to prevent the abuse and excess that nearly caused the collapse of many of these firms and the financial system itself."
But the anger often underlying his discussion of Wall Street in recent months suggested the White House feels a lot of popular support these days for tacitly punitive action against the banks. Obama urged financial executives "to cover the costs of the rescue, not by sticking it to your shareholders or your customers or fellow citizens with the bill, but by rolling back bonuses for top earners and executives."
The White House announcement came the same day Attorney General Eric Holder and finance-industry regulators told the federal Financial Crisis Inquiry Commission that they will crack down on fraud and other abuses that contributed to the economic collapse.
The big banks already were fresh from a scolding Wednesday from the financial crisis commission. They were quiet immediately after Obama's announcement. But their representatives in Washington were quick to oppose it.
"Two-thirds of the TARP investment from banks has already been repaid with a large profit to the taxpayer," said Steve Bartlett, head of the Financial Services Roundtable. "This proposed tax will do nothing more than stifle economic recovery and encumber more pressing concerns, such as covering new regulatory costs."
But Rep. Barney Frank, Democratic chairman of the House Financial Services Committee, suggested Congress would soon begin work on enacting the new tax. "Banks can't have it both ways," trumpeting their return to profitability at the same time they say they can't afford to pay back TARP, Frank said on CNBC.
As envisioned by the White House, the financial crisis responsibility fees would:
- Be levied on the leveraged debts of financial firms with more than $50 billion in consolidated assets, excluding FDIC-insured deposits and capital reserves, and that more than 60 percent of expected revenues will most likely be paid by the 10 largest financial institutions.
- Go into effect June 30 and last at least 10 years. "The fee will be in place for 10 years or as long as it takes to raise the full amount necessary to cover all taxpayer losses," Obama said. After five years, the Treasury would report to Congress on the fee's effectiveness.
- Raise up to $117 billion to repay the current projected cost of TARP.
And if political pressure is growing for the banks, it is clearly increasing for Obama as well,.
"My commitment is to recover every single dime the American people are owed," he said. "And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people."
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