President Barack Obama lashed out Thursday at “obscene” corporate bonuses and proposed a fee to raise 90 billion dollars in 10 years from top banks to recoup “every single dime” of a Wall Street bailout.
“We want our money back and we are going to get it,” Obama said, terming a massive government bailout of the banking industry as “distasteful” though necessary, adding it left the sector with a heavy duty to taxpayers.
“My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people,” Obama said.
The plan, if approved by Congress, would raise 90 billion dollars from 50 big financial institutions over 10 years, including foreign banks operating in the United States, but is already facing opposition from the financial sector.
Officials said it could remain in place for up to 12 years and collect 117 billion dollars, the current estimate of the shortfall the government would face from the bailout.
Obama blamed big banks and finance houses for causing the economic crisis with high-risk lending practices and a blind rush to enrich themselves.
“Firms took reckless risks in pursuit of short-term profits and soaring bonuses triggering a financial crisis that nearly pulled the economy into a second Great Depression,” Obama said.
The administration unveiled the tax as Wall Street firms gear up to announce huge bonuses for top executives, a move sure to inflame the public as Americans face 10 percent unemployment and deep economic misery.
The title of the initiative, the “Financial Crisis Responsibility Fee,” makes it clear the administration is placing blame on the sector for the worst economic meltdown since the 1930s Great Depression.
Yet Valerie Jarrett, a senior adviser to the president, insisted that “we’re not trying to pick a fight” with banks.
“It’s a very solid solution to make sure taxpayers are made whole,” she told MSNBC television.
The Obama administration has repeatedly said it would try to recoup the full cost of the 700-billion-dollar Troubled Asset Relief Program (TARP) which was used to bail out banks, and also tapped to aid crippled automakers.
A senior US official said the program, which has seen some money already paid back, would now effectively leave the government around 117 billion dollars out of pocket.
“It is in many ways offensive for those at our major financial institutions to suggest they can today afford excessive, often outlandish bonuses for their top executives” but cannot repay taxpayers, the official said.
But the Financial Services Roundtable, which represents 100 top financial services firms, said the fee was “strictly political.”
“Two-thirds of the TARP investment from banks has already been repaid with a large profit to the taxpayer,” said the Roundtable’s president and chief executive Steve Bartlett.
“This proposed tax will do nothing more than stifle economic recovery and encumber more pressing concerns, such as covering new regulatory costs.”
Republicans also opposed the plan.
“It will fatten the wallets of Democrats on Capitol Hill by 90 billion dollars over the next 10 years,” said Michael Steele, the chairman of the Republican National Committee.
The administration’s proposal, which requires congressional approval, will apply only to firms with over 50 billion dollars in assets, applying a fee of 0.15 percent of liabilities of the companies under a formula aimed at getting the most from those with the riskiest asset mix.
It will cover around 50 firms, including 35 that are US-based and 10 to 15 which are US subsidies of foreign companies. It will last 10 years or as long as necessary to recoup losses under TARP.
No small or community banks would be covered by the plan.
Even though auto firms General Motors and Chrysler also got money from the TARP fund, they will not have to pay the fee, officials said.
According to a Treasury report to Congress published on Monday, the government had committed 545 billion dollars of TARP funds as of January 6.
Of that figure, 372 billion dollars have been disbursed. Banks have already repaid 165.18 billion dollars of those funds, leaving 209 billion dollars outstanding.