WASHINGTON: US President Barack Obama on Thursday proposed Wall Street banks pay up to US$117bil to reimburse taxpayers for the financial bailout, as he slammed bankers for their “massive profits and obscene bonuses.”
Striking a populist tone, Obama called for a fee on the biggest US banks to “recover every single dime” the government spent rescuing the financial sector from its worst crisis since the Great Depression.
“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,” Obama told reporters at a White House event.
Obama and his Democratic allies in Congress are seizing on the chance to cast Wall Street as its political foil in a congressional election year when their party is worried Republicans might weaken its majority status.
Obama, who has labelled financial executives “fat cats” for the huge bonuses they have received, is taking an increasingly tougher line against the industry.
Democrats hope that will resonate with an American public furious at multimillion-dollar bonuses being handed out by banks as the middle-class struggles with double-digit unemployment.
The fee is also aimed at helping to reduce the ballooning US budget deficit.
Democrats in Congress signalled they would quickly take up the legislation.
But Republicans may try to block it. Some of them have criticised the bank fee as a tax that would be passed on to small businesses and Americans with savings accounts.
The aim of Obama’s proposal is to recoup losses from the US$700bil rescue programme of US banks called the Troubled Asset Relief Programme (TARP). It calls for a levy of 0.15 of a percentage point on the balance sheets of companies with assets exceeding US$50bil.
The Obama administration expects to raise US$90bil over the first 10 years, and thinks this will ultimately cover all losses from TARP, although at the moment these losses are being projected at US$117bil.
Big financial firms consider the fee unfair because it will apply even to those companies that have already repaid the rescue funds they received as well as to firms that got no bailout money to start with.
But the White House argues that the industry as a whole benefited from the calm the rescue package brought to the markets. Obama also said the financial industry bears responsibility for the crisis because of what he said were its reckless actions that led to the subprime mortgage meltdown.
Financial industry analysts said the fee would act as a drag on the sector, though the fact that the fee will be spread out over 10 years lessens the impact.
Full details of the fee proposal will not be laid out until Obama delivers his budget for fiscal 2011 in early February, and will then be subject to shaping by Congress.
Obama said the goal of the bank fee is “not to punish Wall Street firms but rather to prevent the abuse and excess that nearly caused the collapse of many of these firms and the financial system itself.” — Reuters