Obama administration proposes big bank fee to repay TARP

By Palm Beach Business.com

WASHINGTON — The Obama administration is proposing a “financial crisis responsibility fee” to recover the cost of the banking bailout.

The fee is intended to collect between $90 billion and $117 billion over 10 years, depending on the final tab of the bailout, also known as the Troubled Asset Recovery Program, or TARP. The fee will be imposed on 40 or 50 of the largest banks, insurance companies and brokers.

“My commitment is to recover every single dime the American people are owed,” President Barack Obama said in a statement.  “And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people – who have not been made whole, and who continue to face real hardship in this recession.” 

The fee is actually mandated in the law that created the TARP. The government is mandated to start recovering the cost of the program by 2013, but the administration decided that earlier was better than later, according to Gene Sperling, counsel to the secretary of the treasury. Sperling spoke with reporters during a conference call Thursday afternoon.

Sperling said the banks should “take responsibility to ensure that the cost of this program is borne by them and not American taxpayers.”

Sperling rejected the notion that the fee would be an unfair burden on these firms, noting that many of them are paying large bonuses to their top executives. “It’s not plausible for major financial institutions to suggest that they can afford multi-billion dollar bonus pools for their executives but can’t afford to make whole the taxpayers.”

The TARP was created in the fall of 2008 to prop up a banking system that seemed near collapse, with the government authorized to spend as much as $700 billion to keep banks afloat.

By August 2009, the cost of the TARP was reduced to $341 billion. Now, with banks and the economy stabilizing, the government’s tab for the program has been cut to somewhere between $90 billion and $117 billion.

The fee will be imposed on firms with assets of at least $50 billion and will raise $90 billion over 10 years. It will be extended beyond 10 years if TARP costs are higher. Sperling said 35 U.S. firms are expected to pay the fee, with 10 or 12 American subsidiaries of foreign firms kicking in. The 10 largest firms are expected to pay 60 percent of outstanding the TARP costs, according to the administration.