From NBC's Athena Jones
WASHINGTON -- The president today announced a plan to recoup taxpayer funds used to help prevent a collapse of the financial system, by collecting a fee from financial institutions with over $50 billion in assets.
Congress must approve the tax -- which the administration has dubbed the Financial Crisis Responsibility Fee. It would be go into effect on June 30 and be in place for a minimum of 10 years or until taxpayers have recouped the full cost of the Troubled Asset Relief Program (TARP).
Calling the TARP "a distasteful but necessary thing to do", the president said his economic team had managed the program well and recovered the majority of the money provided to the banks.
"But far as I'm concerned however, that's not good enough," Obama said. "My commitment is to recover every single dime the American people are owed and 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, folks who have not been made whole and who continue to face hardship in this recession."
"We want our money back," the president went on. "And we're gonna get it."
Senior administration officials outlined the proposal last night. A more detailed version of the plan will be the budget and the administration will work with members of Congress and experts on drafting it. In the budget, the administration we will project the cost of TARP as $117 billion -- down from $341 billion in the mid-session review.
About 50 firms would be affected and the fees, to be collected by the Internal Revenue Service, which are expected to bring in $90 billion over 10 years and about $117 billion over 12 years, according to a fact sheet provided by the White House.
In responding to criticism of the fee by financial institutions, Obama suggested it was offensive for major financial institutions that can afford huge bonuses to complain, calling their logic "twisted."
"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," he said.
Public anger at bailouts for financial firms and automakers hurt the president's poll numbers over the course of last year and reports that many now-healthy banks are preparing to pay out large bonuses to top executives have again stoked frustration among the administration, lawmakers and ordinary Americans.
The president said the goal of the fee, along with a financial regulatory reform bill making its way through Congress, was not to punish banks but to prevent another crisis. He urged companies to do more to help families stay in their homes and to provide credit for small businesses, saying they should embrace financial industry reforms as well as the fee.
"Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities," Obama said. "And I'd urge you to cover the costs of the rescue not by sticking it to (sic) your shareholders or your customers or fellow citizens with the bill but by rolling back bonuses for top earners and executives."
The proposed fee that would be assessed would be approximately 15 basis points of covered liability, to be determined by looking at a firms total assets, subtracting tier one capital -- like common stock -- as well as FDIC deposits for banks -- which are already subject to fees -- or insurance policy reserves for insurance companies.
Affected firms include bank holding companies, thrift holding companies, insured depositors and insurance companies and broker-dealer firms. Some of the companies that will be subject to the fee may not have received direct TARP assistance, but all financial firms were helped by federal government, said an administration official who briefed the press on the plan. No firms can claim they were "islands unto themselves."
The administration official said automakers would not be subject to the fee, because would be difficult to apply the formula they have developed to determine the size of the fee for each firm to carmakers.