Obama Considers New Bank Fee to Reduce Deficit
According to a New York Times report Monday, Mr. Obama's budget – set to be released in February - will likely included a proposed fee on financial firms that would help reduce the federal deficit.
Banks wrapped up a generally stellar year, posting healthy profits after the government provided them with billions of dollars in emergency aid. Now, these same banks are poised to spend billions more on employee bonuses – a fact that will almost certainly create a public backlash at a time when unemployment still hovers at 10 percent.
In that climate, the White House is trying to craft a policy that satisfies the American public and international partners eager for stricter controls over banks.
As the Times notes, the European Union has called for a transaction tax in December, echoing a similar proposal offered by U.K. Prime Minister Gordon Brown at the G-20 summit in November – a measure designed to stockpile revenue for any future necessary bailouts. Britain and France have separately called for heavy taxation of executive bonuses.
The U.S. has resisted these measures, saying a transaction tax would simply be passed along to consumers and bonus taxes could be circumvented. Mr. Obama's challenge is to find a meaningful policy that would both restore federal coffers and promote corporate responsibility.
Many financial institutions, including Goldman Sachs, have tried to mitigate the furor by paying out a greater portion of bonus money in deferred stock. But rhetoric from public officials remains heated.
White House Council of Economic Advisors chairwoman Christina Romer said Sunday that the bonuses were "ridiculous" and predicted they would "offend the American people."
And former New York Gov. Elior Spitzer blasted U.S. banks, telling CBS' "The Early Show" Monday their profits were built solely on taxpayer-funded bailouts. "They believe they are entitled to these crazy sums of money," Spitzer said. "It is inequitable, it is wrong."