Obama to Announce Bank Fees to Recoup TARP Losses
EmailABC News’ Karen Travers and Sunlen Miller report:
President Obama will announce today that the administration plans to enact fees on the nation’s largest financial firms in order to recoup the losses expected from TARP.
As has been reported, this proposal has been under discussion since August.
A senior administration official said on a conference call with reporters Wednesday night that President Obama feels strongly that he “must honor both his personal commitment and the legal commitment of the TARP to ensure that all of the costs are borne by the financial industry and not by the American taxpayer.”
“The president has made clear from the very beginning that taxpayers would not bear a penny of the costs of the TARP program,” this official said.
When asked how the administration will make sure that fees are not passed on to customers, the senior administration official said that these financial institutions have a “competitive incentive” to not do that because it is not a fee on the entire financial industry.
“If those people chose to pass on those costs, they would face a competitive disadvantage from the far far larger number of financial firms who are excluded from this fee.”
“It will just seem beyond the pale to the typical American to hear of the bonus pool in the 10 to 15 to 20 billion level in the coming weeks and then suggest that the only way thtat they could pay this financial crisis responsibility fee back to the American taxpayer is to pass on the cost to lenders,” this official said. “I just don’t think it’s going to happen for competitive reasons and I don’t think it would fly well to customers and borrowers.”
The senior administration official stressed that TARP was designed to help out the economy as a whole and not bailout specific institutions or their executives and said the fee is a “minimum” of what is owed back for the significant costs that taxpayers put out.
The administration official put the cost of TARP at $117billion on the high end, but said that the administration is using the “most conservative accounting possible.”
The fees, which are intended to last at least 10 year, will raise about $90 billion. If the overall cost of TARP is more than that, the fees will be extended “as long as necessary” to ensure that the taxpayer money is paid back completely.
The auto industry will be exempt from these fees because the administration does not feel that the structure can work for auto companies.
Some key points about the fees:
- The fees will go into effect on June 30 2010.
- They will apply only to firms with over $50b in assets
- No small or community or bank would be covered by this fee
- 50 firms will be covered by the “financial crisis responsibility fee”
- 35 will be U.S. companies, 10-15 will be U.S. subsidiaries of foreign companies
- 20-27 of those institutions will be U.S. banks.
- The fees would last for a minimum of 10 years but could last longer in order to pay back the entirety of the taxpayer investment. The fee is designed to not last for less than 10 years
- The administration does not expect to bring in the same amount each year, but the cumulative total is $90 billion over 10 years. The administration feels that that will “be sufficient” to meet the ultimate loss of TARP
- More details will be released when the administration releases its budget in February
- The senior administration official referenced several times the “exceptional bonuses” received by top executives at some of the financial institutions as a justification for trying to recoup the TARP loss.
“Those who suggest they should not bear this burden while doing they are doing well significantly due to the extraordinary actions funded by taxpayers well enough to be offering rather exceptional bonuses, are in essence suggesting that it is better for the American taxpayer to deal with high deficits, better for our children and grandchildren to deal with higher debt, than for them to pay this financial crisis responsibility fee, that’s just not an argument that we buy.”
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I hope he starts with Citi Mortgage who actually charges to make a payment.
Posted by: Gary | January 14, 2010, 7:07 am 7:07 am
Republicans will howl but this is probably one of the first moves by Obama pertaining to the bailouts that is really popular with the public. Americans want their money back and for these banks to suffer.
Posted by: matt | January 14, 2010, 7:51 am 7:51 am
I don’t trust the industry not to pass on some of this fee to consumers. Bankers are cowardly vermin and only look out for theirselves. Isn’t it interesting that they are able to pay back huge sums to the federal govt but aren’t loaning money to small businesses to create jobs?
Posted by: Bob | January 14, 2010, 8:30 am 8:30 am
Will the Bank fees get passed on to consumers?..are we seriously asking that as a serious question? Will the cost of more folks on medicaid be passed on? Will the cost of cap n trade be passed on? Who paid for all those “free” H1N1 shots? Who will pay when the unions exempt themselves from the cadillac tax? Who paid for the bail-outs? Who paid for GM? Who will pay for the corn husker deal?
Posted by: cindy | January 14, 2010, 9:00 am 9:00 am
It has been exposed that banks too big to fail enjoy the financial backing of the taxpayers, an incredibly valuable insurance policy that smaller banks do not enjoy. If the big banks are not charged for this service, it will badly distort the free market.
As for passing it along to consumers, that is what SHOULD happen. If the market cannot bear covering the cost of the “too big to fail” insurance, then the market will eliminate those institution in favor of smaller institutions that do not carry that insurance. It may be that too big to fail institutions should be broken up, but I trust the free market to figure that out IF the true costs of the taxpayer insurance we now know they rely upon is properly passed through.
If the big banks pass through all the costs and they prove excessive, consumers will go to smaller institutions that do not carry those costs nor the risk to the tax payer.
Posted by: jhw539 | January 14, 2010, 9:10 am 9:10 am
Wow….yes whine about the banks. but in my opinion its the american taxpayers who are at fault who lived beyond their means. Who told you to buy a house that you couldnt afford. DUHHHHH i mean you all think they getting this huge bonuses and thats what they are saying on tv but totally untrue…maybe top management but down the ranks….get your facts straight….
Posted by: mar | January 14, 2010, 9:29 am 9:29 am
i wouldnt bet on him getting reelecting next term! i dont want to live in a socialist government.
Posted by: mar | January 14, 2010, 9:31 am 9:31 am
The banks will weasel their way out of these fees – shoot, they can’t even prove where the money went in the first place. The major financial institutions paid large sums of our TARP money in bonus plans to really big weasels to keep their wallets full… and many of those weasels are having lunch with your Congressmen today.
Posted by: Sheila | January 14, 2010, 9:51 am 9:51 am
Another Obama Con: Obama takes Tarp funds,Gives our money to G.M.& Chrysler against the rules,And it will never be payed back, Then taxes the banks who received tarp or not, even after the fact the banks are paying or have paid back these funds with interest, The banks will pass it on to us. So we take our money,gives it to Automakers and his Union buddies to blow and were charge again to pay G.M. and Chyslers debt back, and then we will need more money because there failing companys. When does this stop, NEVER UNTIL YOU VOTE THESE BUMS OUT!!!
Posted by: Dirtydal | January 14, 2010, 10:08 am 10:08 am
Posted by: Dirtydal | Jan 14, 2010 10:08:07 AM
You left out Fannie and Freddie! They get $400 billion. All for a good cause.
Posted by: Fred in the Red | January 14, 2010, 10:15 am 10:15 am
“Isn’t it interesting that they are able to pay back huge sums to the federal govt but aren’t loaning money to small businesses to create jobs?”
Posted by: Bob | Jan 14, 2010 8:30:47 AM
________
These bailed out banks realized, almost from the first moment that they received their bailout money, what a mistake it was to let the federal government have leverage in their day-to-day business decisions. So, YES they are trying to payback the bailout loans as quickly as possible so they can get the federal government off their backs. The problem is once the federal government is on a business’ back, IT will do whatever it can to stay on that business’ back–even AFTER the bailout loan is paid back. Wake up America! The Democrats aren’t stopping at bailed out companies. In fact, it’s not just companies! They already control the strings of the poor. They already announced their plans to come after wealthy individuals–raising taxes on those making at least $250,000. And with the help of their healthcare reform bill, the federal government is already preparing a nest on the backs of the middle class.
Posted by: James Danley | January 14, 2010, 10:44 am 10:44 am
Another Obama Con: Obama takes Tarp funds,Gives our money to G.M.& Chrysler against the rules,And it will never be payed back, Then taxes the banks who received tarp or not, even after the fact the banks are paying or have paid back these funds with interest, The banks will pass it on to us.
Posted by: Dirtydal |
Exactly right.
Posted by: Foghorn Leghorn | January 14, 2010, 11:37 am 11:37 am
The banking industry like all other industries, are a for profit company,so when the White House responds, about a real concern for people who are already struggling financially with added fees, “I JUST DON’T THINK (that’s obvious) it’s going to happen for competitive reasons (remember PROFIT they all need to keep their shareholders happy for without shareholders THEY DO NOT EXIST SPARKEY) profit and I don’t think it would fly well with customers and borrowers” (Ummm it doesn’t but we really have no choice Professor) one has to ask themselves where has the Administration been for the past 20 plus years…Banks 100 percent ALWAYS PASS ON FEES…THEY LIVE TO PASS ON FEES the customer has NO CHOICE, unless they want to keep their money under a mattress which may not be so bad, but to pay these fees….YOU CAN’T MAKE THIS STUFF UP……Just another “tax” for the consumer…..
Posted by: Parallex View | January 14, 2010, 11:39 am 11:39 am
ANY…Major corporation INCLUDING the automobile industries IS going to be hit by this added TAX….ANY large corporation who depends on the banking industry for loans to expand their businesses, maintain inventory levels etc. is going to be HIT HARD by this, it WILL result in a trickle down affect that WILL hit the consumer in either higher prices or higher unemployment….IF IT AFFECTS BUSINESS IT AFFECTS THE CONSUMER..Obama, banks are a FOR PROFIT business who must keep their shareholders happy through declared dividends…no profit…no dividends…no shareholders..no banks…no loans to major corporations..no manufacturing…no jobs…Bank have no other recourse but to pass this “TAX” on to their customers and borrowers if they chose to remain in business…Don’t you have anyone on your staff who has attended business school??? the very LAST thing you do during a economic downturn is increase debt and taxes 101 Economics…..
Posted by: Parallex View | January 14, 2010, 12:11 pm 12:11 pm
jhw….Large corporations DO NOT go to their local community bank that grandma uses to deposit her social security check..THEY must depend upon Large banking institutions, the ones that will be hit by this added TAX, that have the funds to support these large loans in order to expand or hire or explore new avenues of business….They, large borrowers, will either continue with business as usual and pass these fees on to their buyers…which will reach us the small consumer at some point, or they will cease to maintain their competitive edge and eventually GO-OUT-OF-BUSINESS or outsource more of their businesses across the seas, either way it means more unemployment or higher prices…Reading some of your previous comments…you are smarter than that not to realize the impact this will have on our present economic climate…NOT GOOD..
Posted by: Parallex View | January 14, 2010, 12:32 pm 12:32 pm
Subject: A Confederacy of Fools. Author unknown.
“The danger to America is not Barack Obama but a citizenry capable of entrusting a man like him with the presidency. It will be easier to limit and undo the follies of an Obama presidency than to restore the necessary common sense and good judgment to a depraved electorate willing to have such a man for their president. The problem is much deeper and far more serious than Mr. Obama, who is a mere symptom of what ails us. Blaming the prince of the fools should not blind anyone to the vast confederacy of fools that made him their prince. The republic can survive a Barack Obama, who is, after all, merely a fool. It is less likely to survive a multitude of fools such as those who made him their president.”
Posted by: pauldia | January 14, 2010, 12:34 pm 12:34 pm
jhw….Large corporations DO NOT go to their local community bank that grandma uses to deposit her social security check..THEY must depend upon Large banking institutions,
Parallex View | Jan 14, 2010 12:32:20 PM
Corporations of that magnitude have many options for financing, including stock floats, off shore banks, bonds, etc. And those corporations grew before banks that were ‘too big to fail’ EXISTED. You are blowing smoke trying to hide the fact that a bank with $40 billion in assets is more than big enough to serve any banking need, corporate or private.
Posted by: jhw539 | January 14, 2010, 12:43 pm 12:43 pm
Off shore banks???? As an obvious Obama supporter such as yourself, I am sure you realize that Obama’s proposed tax overhaul aims at businesses who utilize “off-shore” tax heavens or off-shore banks…right…you do know that right…just another penalty imposed upon businesses who chose to invest or do business OFF-SHORE…LOL…you do realize he is backing business into a corner that will have a profound effect on Corporate America and result in a profound effect on the little guy….Guess I was reading your understanding incorrectly…BTW..Don’t depend on the bond market..have you looked into the return rates on bonds..you put you money into bonds NOT EXPECTING a return Just a place to hide your money..Stock floats??? LOL depending upon pass and current market conditions..The Dems all for taking chances and when the bough breaks it’s all the banks fault.. LOL..In the consumer world we call this check kiting…UMM NO!!..Again, Large Banks need to make a profit or they would no longer be LARGE…
Posted by: Parallex View | January 14, 2010, 1:16 pm 1:16 pm
Parallex View is ALL for imposing bonus restrictions on bank executives whom indirectly benefited from the tax payer bile out monies…BUT…A bank is not an individual, it is a for profit business who serves Number One: Shareholders. Number Two: The community needs as in private loans for things such as homes, auto, education for the kids (most smaller banks who serve the samll consumer banking ALSO RELY ON LARGE CORPORATE BANKS FOR FUNDING; and in most cases, Number Three: Community Activists who do good for those in need. Therefore, when you in essense, restrict its ability to provide affordable loans to the consumer and small business and large corporations through added fees, number one and number two and number three are going to be affected negatively at some point..It’s just a fact…We have gotten too big to turn back to the days of small banking and still expect to maintain our standard of living….period….
Posted by: Parallex View | January 14, 2010, 1:55 pm 1:55 pm
Another Obama job killer all the while he claims he is trying to create jobs. You Lie!!!! Again. Still. He is punishing banks that did not accept TARP funds. This will not only be passed on to tax payers but also will inhibit lending-another job killer. The irony is that while Obama condemns banks for greedily lending to those who could not afford it, he was a lead attorney for a lawsuit against banks because they REFUSED to lend to unqualified applicants. What is wrong with the Republicans? They have such a target rich environment with this creep in the White House and they sit there with their thumb up their butts.
Posted by: mickeymat | January 14, 2010, 4:21 pm 4:21 pm
I trust my government more than I trust the Robber Barons
Posted by: Cheryl | January 16, 2010, 7:50 pm 7:50 pm