Obama considers new fee on banks
The budget that President Obama submits next month is likely to include new fees on financial firms as the White House seeks to recover the full costs of its $700 billion bailout of the banking industry, officials said.
The idea of a fee on the nation's biggest banks could be politically popular, coming in a week when those companies begin to announce tens of billions of dollars in bonuses to executives for their work in 2009. Such a fee would also demonstrate the administration's eagerness to decrease the soaring federal deficit, according to administration aides familiar with the developing plan.
A senior White House official confirmed on Monday that a fee on financial firms is on a menu of ideas the president is considering as he prepares to submit his budget on Feb. 2.
"While we have made great progress in recouping a large portion of the investment, consistent with the law," the official said, "the president will propose a way to recoup additional funds and one of the options is a levy on financial institutions."
Key details remain unresolved, including how big the fees would be and how to ensure that they are not passed along to bank customers.
White House press secretary Robert Gibbs declined on Monday to discuss specifics about the president's budget after the proposed fee was first reported on Politico's Web site. But Gibbs said Obama has long favored finding ways to make sure taxpayers are reimbursed.
"The president has talked on a number of occasions about ensuring that the money that taxpayers put up to rescue our financial system is paid back in full," Gibbs said.
In the absence of details, financial industry representatives issued general warnings against placing additional burdens on the sector.
"The industry is starting to recover, the economy is starting to recover, and a tax would hinder both the industry and the economy -- and for that matter, the American people," said Scott Talbott of the Financial Services Roundtable, a trade group that represents the largest financial companies.
Any new fee would require congressional approval.
In one approach, the government would collect a one-time fee determined by the size of each firm, similar to the fees collected by the Federal Deposit Insurance Corp. to cover the cost of bank failures.
If the goal is to cover the cost of the entire bailout, setting fees could prove difficult since the final tab has not been tallied. Many -- but not all -- banks are expected to repay their bailout funds with interest and other payments. The Treasury's most recent estimate puts the ultimate cost of the bailout, which is still ongoing, at $120 billion.