US President Barack Obama on Thursday proposed Wall Street banks pay up to US$117 billion to reimburse taxpayers for the financial bailout, as he slammed bankers for their “massive profits and obscene bonuses.”
Striking a populist tone, Obama called for a fee on the biggest US banks to “recover every single dime” the government spent rescuing the financial sector from its worst crisis since the Great Depression.
“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 told reporters at a White House event.
The plan, if approved by Congress, would raise US$90 billion from 50 big financial institutions over 10 years, including foreign banks operating in the US, but is already facing opposition from the financial sector.
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 the blame on the sector for the worst economic meltdown since the 1930s Great Depression.
The Obama administration has repeatedly said it would try to recoup the full cost of the US$700 billion Troubled Asset Relief Program (TARP) that was used to bail out banks, and also tapped to aid crippled automakers.
A senior US official said some money has been paid back, but the government would be left covering about US$117 billion.
“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.
However, 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,” the Roundtable’s president and chief executive Steve Bartlett said. “This proposed tax will do nothing more than stifle economic recovery and encumber more pressing concerns, such as covering new regulatory costs.”
The administration’s proposal, which requires congressional approval, will apply only to firms with more than US$50 billion in assets, applying a fee of 0.15 percent of liabilities of the companies.
It will cover around 50 firms, including 35 that are US-based and 10 to 15 that are US subsidiaries of foreign companies.
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