Obama plans fee on financial firms to recover TARP money
Wednesday, January 13, 2010
President Obama will announce on Thursday a plan to impose a new fee on the nation's biggest financial firms in what officials say will be a years-long effort to recoup the government money used to bail out those institutions, a senior administration official said Tuesday night.
The fee could return as much as $120 billion worth of losses to the U.S. Treasury from the $700 billion Troubled Assets Relief Program, or TARP, which was designed to rescue the firms during the economic crisis, officials said.
The expected announcement appears to confirm reports that the 2011 budget Obama will submit next month will include revenues raised by such a fee -- funds that could help reduce the nation's soaring deficit.
But the senior official said the motivation behind the fee is Obama's desire to recover for taxpayers the massive investment pumped into Wall Street during the financial meltdown that was triggered 15 months ago.
Obama fought for the bailout in his first weeks in office but has since watched in frustration as some of the biggest firms have given billions of dollars in bonuses to their executives.
The senior official, who spoke on the condition of anonymity because the decision has not been announced yet, said it has been under consideration since August. The law that created TARP requires the government to seek repayment, but a new fee would accelerate that process.
"As the banking industry recovered, the president and the economic team felt it was important to discuss ways to recoup every dime for the American people more quickly than the law required," the official said.
Banking executives have broadly opposed such a fee, saying it could generate new economic shock waves and stifle lending during a still-shaky recovery.
In addition, economists have said they worry that any new fee -- such as one imposed on banking transactions -- could be passed on by the banks to their customers, creating in essence a new tax for consumers.
The senior official declined to provide details about how the administration's plan would avoid those problems. But the official said it would not be a one-time fee and would last for years.
Banks and other financial institutions have already begun to repay some of the TARP money. But government officials estimate that without a fee of some kind, losses from the program could be as much as $120 billion.
"That is the highest end of a conservative estimate of the cost of TARP," the senior official said. "Officials expect the number will be much lower, and over the course of years, the fee would pay back any cost to the taxpayer."