OBAMA TELLS BANKS: ‘WE WANT OUR MONEY BACK’…. When it comes to Wall Street and the financial industry, President Obama has a lot of changes in mind. He wants new rules to prevent future catastrophes; he wants banks to start increasing the loans they’re willing to make; and he wants to see the TARP funds repaid.
Obama tackled the last of these three today. At a White House event, the president said:
“We want our money back, and we’re going to get it. That’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers.”
The plan is to raise $90 billion over the next decade — which, for this industry, isn’t exactly an overwhelming burden — with this new “fee.” It would be applied to about 50 banks, insurance companies, and Wall Street trading houses with assets of more than $50 billion. The tax would remain in place until the funds are recovered, though it would be scrapped before the end of the decade if the $90 billion is returned ahead of schedule.
Would the costs prove counter-productive if/when the banks passed along the costs to customers? The Obama administration doesn’t believe so: “Firms that raised prices would give smaller rivals a competitive advantage, creating an incentive for companies instead to swallow the cost, potentially by reducing employee pay.”
“It is in many ways offensive for those at our major financial institutions to suggest that they can today afford excessive, often outlandish bonuses for their top executives but cannot afford to make whole the taxpayers,” a senior administration official said. The new fee, the official said, is “the least they could do.”
Given that the plan requires congressional approval, it will be fairly interesting to see Republicans come up with a way to sound populist while siding with Wall Street and fighting against the “we want our money back” message. NBC speculated this morning, “[I]t does put Republicans in a box. It forces them to make a choice of siding with the banks or not. And who is going to want to argue that banks shouldn’t pay for their own bailout?”
And given that the “Financial Crisis Responsibility Fee” is actually quite modest, it makes inevitable GOP opposition that much less defensible.
I suspect the DCCC is already drawing up the ads: “After Bush bailed out Wall Street, Obama said the banks should put paying us back ahead of their fat-cat bonuses. Rep. Smith sided with Wall Street, instead of you….”
Jon Chait has a good piece on the new White House policy, including an explanation on how it helps level the playing field between large and small financial institutions.