Obama Wants 'Responsibility Fee' to Get Bank Bailout Funds Back
President Barack Obama is proposing a "Financial Crisis Responsibility Fee" to tax large financial institutions that received government funds through the Troubled Asset Relief Program (TARP). The news comes in the midst of reports that the government may earn billions of dollars on bailouts. The proposed fee would last for at least 10 years, until all taxpayer dollars are repaid. The fee would apply to the debt of financial institutions with more than $50bn of consolidated assets. The fee would be assessed at about 15 bps of covered liabilities - or assets, less Tier 1 capital and deposits already covered by Federal Deposit Insurance Corp. (FDIC) assessments - per year, according to a White House fact sheet (download here). Regulators would report covered liabilities and the Internal Revenue Service (IRS) would collect the fee. Revenues would be paid into the general fund, to reduce the national deficit. The President said Thursday his decision to propose the fee is spurred by reports of "massive profits and obscene bonuses at the very firms who owe their continued existence to the American people." In a statement, he added: "That’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street.” The fee would take effect June 30, 2010 and would expire after 10 years unless costs are not recouped by that time. The proposed fee would raise $117bn in about 12 years, and $90bn over the next 10 years. More than 60% of revenues will be paid by the 10 largest firms. "By levying a fee on the liabilities of the largest firms – excluding FDIC-assessed deposits and insurance policy reserves, as appropriate – the Financial Crisis Responsibility Fee will place its heaviest burden on the largest firms that have taken on the most debt," the White House said in a statement. The President's move to speed up repayment of bailout funds follows a move by Rep Peter Welch (D-VT) to introduce legislation to levy new taxes on yearly employee bonuses at financial institutions that receive financial assistance from TARP. Under the bill, bonuses above $50,000 in either cash or stock would be taxed at a rate of 50%. Write to Diana Golobay.