Obama to Propose Fee on Bailed Out Banks
President Obama is to announce Thursday at 11:50 a.m. Eastern his proposal to impose a fee on top financial institutions to help cover expected losses in the Troubled Asset Relief Program (TARP) bailout program.
The fee of 15 basis points (15/100ths of 1 percent) of bank assets (excluding insured deposits and common stock holdings) would only apply to firms with $50 billion in assets or more. No small or community banks would have to pay the fee. The fee, if made into policy, is expected to remain in effect for a minimum of 10 years.
Officials expect about 50 banks and other top financial institutions would be hit by the fees. The only company a senior official mentioned that would definitely be charged is the American International Group Inc. (A.I.G.)
The White House estimates that TARP losses will amount to $117-billion dollars. The fees would raise about $90-billion over 10 years. The fees could be extended if all losses are not covered.
A senior official says any of the institutions hit by the fees would put themselves at a competitive disadvantage if they tried to pass on the cost of the fees to their customers.
The auto companies that received bailouts would not be subject to the fees, nor would Fannie Mae or Freddie Mac.
A senior official says the goal of the fees is to insure that top financial institutions that were major contributors to the financial crisis and also major beneficiaries of the bailout, take responsibility to ensure that all the costs of federal assistance are not added to the deficit or passed on to future generations as part of the National Debt.
The White House is expected to issue a Fact Sheet on the proposal later Thursday morning.
Mark Knoller is a CBS News White House correspondent. You can read more of his posts here. You can also follow him on Twitter here: http://twitter.com/markknoller.
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