Obama budget would double bank tax size
By Jia Lynn Yang and Zachary A. Goldfarb,
JEWEL SAMAD AFP/GETTY IMAGES
The bank tax, also known as the "Financial Crisis Responsibility Fee," first appeared in Obama's 2011 budget and was projected to raise $90 billion over 10 years. A year later, in the wake of the mid-term elections and accusations from executives that Obama was "anti-business," the White House cut the proposal by two-thirds to just $30 billion.
In this year's budget, the bank tax is back up to $61 billion. The plan states: "Many of the largest financial firms contributed to the financial crisis through the risks they took, and all of the largest firms benefited enormously from the extraordinary actions taken to stabilize the financial system. The Budget asks these firms to compensate Americans for benefits they received from these actions and to recoup TARP costs."
As the Occupy Wall Street protests started heating up last year, Obama's aides began thinking of ways to harness the anger against Wall Street for the re-election campaign -- especially if Mitt Romney, with his background in private equity, winds up being the Republican nominee.
The bank tax targets financial firms with more than $50 billion in assets.
The tax would also help pay for Obama's mortgage refinancing program, according to the budget.
The reason for the increase in the fees, according to an
administration official, is that the expected cost of the rescue of
the financial system has increased in the past year. The crisis fees
are linked to that amount.
In November 2010, the cost of the Troubled Assets Relief Program plus other investments in American International Group was estimated to be $28 billion over 10 years. But in November 2011, the cost increased to $54 billion.
That was largely because Treasury-ownership stakes in AIG and General Motors – which it received in exchange for the bailouts – had declined in value as those companies’ shares fell.
The banking industry shot back Monday afternoon, calling the tax "arbitrary."
"Despite claims to the contrary, the facts on TARP are very clear: Taxpayers have profited $13 billion from their investments in banks through the program and Treasury predicts they will see a lifetime positive return of more than $20 billion," said Frank Keating, president and chief executive of the American Bankers Association. "Given that non-bank programs are responsible for all of TARP’s losses, this would simply be an arbitrary tax with no regard to where losses actually occurred."
This story has been updated.
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