White House to Unveil Bank 'Tarp' Tax
Plan is designed to recoup $120 billion over 10 years
January 13, 2010
WASHINGTON — The Obama administration is expected Thursday morning to lay out its plans for recouping losses stemming from the government's rescue efforts by imposing a fee on the largest financial institutions.
Sources said the 20 to 25 largest financial firms will be affected and a company's cost will be based on its assets minus its equity and its insured deposits. That formula would tend to favor a deposit-focused company like Bank of America over one like Goldman Sachs.
The administration's plan is designed to recoup some $120 billion over 10 years, sources said.
Opponents, including the American Bankers Association, argued such a move is premature, that the government does not yet know much it will lose on efforts like the Troubled Asset Relief Program. They also argue that any losses are not attributable to investments in the largest banks, most of which have repaid the government's capital, but rather from the auto makers and American International Group.
Testifying on Capitol Hill Wednesday, JPMorgan Chase chief executive James Dimon said this sort of tax on the industry is inappropriate.
"Using tax policy to punish people is a bad idea," he told CNBC after his testimony before the Financial Crisis Inquiry Committee. Asked whether the cost is likely to be passed on to consumers, Dimon said, "All businesses tend to pass their costs on to their customers."
But proponents of the White House's plans, including House Financial Services Committee Chairman Barney Frank, claim financial services firms benefited by the government propping up the car companies and the insurance giant.
"They may have paid it [Tarp] back, but everyone knows those institutions were engaged in the kinds of activity that led to the problem," Frank told reporters at a press conference. "So yes, I do think it's very fair."
Frank added, "When we passed the Tarp bill, we mandated that the administration in power in 2013 [set up a tax], but that didn't mean that somebody couldn't do it before."
Stacy Kaper contributed to this story.
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