On Thursday, President Barack Obama will propose his plan to recoup the $117 billion spent on the Troubled Asset Relief Program (TARP). A senior administration official has said that the president will call on Congress to tax the nation’s largest financial institutions to recover the debt.
Obama’s "financial crisis responsibility fee" will charge firms with more than $50 billion in assets approximately 15 basis points, or 0.15 percentage point, of covered liabilities, according to Reuters.
The fee is designed to take effect on June 30 and will run for a minimum of 10 years. Approximately 50 firms will be covered under the plan that will be officially released in February in the president’s 2011 budget.
Fannie Mae, Freddie Mac and all U.S. automakers, who received bailouts similar to those given to major financial firms, will be spared from the tax.
However, the fee will be levied on financial institutions even if they have already paid back the money that they received from TARP.
Meanwhile, firms with more than $50 billion in assets that did not receive support from the federal government will also be subject to the tax because they benefitted from the stability that TARP brought to the financial world, the official said.
"This proposed tax will do nothing more than stifle economic recovery and encumber more pressing concerns, such as covering new regulatory costs," said Steve Bartlett, president of the Financial Roundtable, quoted by CNN.