Secretary Geithner: Bank Tax Not Designed to Punish Wall Street

By Lindsey Ellerson

Jan 14, 2010 5:49pm

ABC News’ Matthew Jaffe reports: Treasury Secretary Tim Geithner today said that the Obama administration’s new fee on about 50 of the nation’s biggest banks with assets of $50 billion or more is not an attempt to punish Wall Street. “This policy is not designed to punish,” Geithner told CNBC. “It's designed to meet the simple, practical, legal obligation, and we're doing it in a way, I think, it makes economic sense because we're doing it in a way that is, in effect, a tax on leverage, it's a tax on risk in some ways, and it's borne by the people that benefitted most from the crisis. That seems fair.” “We thought it was economically sensible, fair, good policy, legally necessary to propose now how to make sure that the costs of this are not born by people who were innocent victims of all the wreckage,” he said. Wall Street has come under fire in the past week as expectations grew that major firms were set to dish out big bonuses. “It's just very hard for people to understand with unemployment at 10 percent, you know, with millions of Americans–this is the United States of America–with millions of Americans on food stamps, worst recession in almost a generation, that you could see compensation practice produce such huge returns to people who were at the center of this mess,” Geithner said. “It is inexplicable.” “I can't explain it, I don't understand it,” he said, “and I think it's very important for those people running these firms, for their boards of directors, for their shareholders, to work very hard to try to earn back some basic sense of trust and confidence of the American people. I think it's very important to do that.” One key source of outrage among the American public has been the government’s record bailout of AIG. Geithner has recently been embroiled in a controversy surrounding the New York Fed – under Geithner’s leadership – pressuring the insurance company not to disclose details about paying its counterparties full value for their credit-default swaps during the fall of 2008. “I wasn't involved in that decision,” Geithner said today. “But I do think the Fed–the Fed did disclose all that information subsequently. I think they made the right thing disclosing it. It's important for the American people to see all that information.” Asked if paying the counterparties full value was the right decision, Geithner replied, “Absolutely.” “We had no choice at the time other than to do this,” said Geithner, who will testify on January 27 before a House panel looking into the matter. “And I'm, personally, very confident it was the right thing to do, and we did it in the best way possible for the American people.” Geithner today also stated that the administration is not considering an extension of the Bush administration’s tax cuts for high earners. “We are committed to make sure that we leave in place the tax cuts that benefit the vast majority of Americans,” he said. The Treasury chief today also voiced confusion about why some Americans believe that he came to Treasury from Wall Street. “I think when I came into office, I think most people believed I spent my life working in an investment bank,” he said. “I've spent my life in public service. I grew up largely outside the country, so I don't understand why that perception existed at the beginning.” -Matthew Jaffe

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