Obama Said to Consider Fee on Banks to Trim Deficit
Jan. 11 (AFP) President Barack Obama may propose a fee on financial-services companies as a way to fulfill a vow on cutting the budget deficit in half, administration officials said.
The officials declined to give specifics about how the fee would be structured. One official, who wouldn’t be identified by name because the proposal is still being discussed, said it may be included in the administration’s budget to be released next month. The proposal won’t include a tax on Wall Street bonuses or financial-services transactions, Politico reported today, citing unidentified officials.
The U.S. budget deficit surged to $1.4 trillion last year in part because of bank bailouts paid for by taxpayers. Profits at finance companies, which begin reporting earnings later this week, have since rebounded and may triple by 2011, according to analyst surveys compiled by Bloomberg. Bank of America Corp., the biggest U.S. lender, said last week it expects to pay record bonuses to some investment bankers.
“The president has talked on a number of occasions about ensuring that the money that taxpayers have put up to rescue our financial system is paid back in full,” White House press secretary Robert Gibbs said without commenting on Obama’s budget plans.
Obama will propose a way to recoup additional funds and among the options is a levy on financial institutions, one of the administration officials said.
Banks repaid the U.S. $165 billion last year, letting the government recoup about two-thirds of its total investment in the banking system through the $700 billion financial rescue, according to a U.S. Treasury Department report released today.
Fees, Interest, Dividends
The Troubled Asset Relief Program also collected $12.9 billion in fees, dividends and interest, the Treasury said. So far, the U.S. has made an 8 percent return on its bank investments, a Treasury official told reporters.
“We have a lot of concerns, and hopefully our concerns come from things that we have not seen that will not be incorporated,” Wayne Abernathy, executive vice president of the American Bankers Association, said in a telephone interview.
A fee would create a “real fairness issue,” since banks are concerned they’ll be forced to pay for parts of bailout that “didn’t work” in addition to paying an “excellent” return to the Treasury, Abernathy said.
Public sentiment has turned against last year’s government rescue of the financial-services industry. Almost two-thirds of Americans believe bailing out the banks was a bad idea, a Bloomberg National Poll taken Dec. 3-7 showed.
Stricter Rules Backed
Just over half of respondents said banks should be subject to stricter regulation and 31 percent would allow troubled banks to fail. The poll’s margin of error was plus or minus 3.1 percentage points.
“There’s a lot of public resentment of the fact that bonuses are being paid, and a lack of accountability,” said Andrew Kohut, director of the Pew Research Center in Washington.
Representatives for Bank of America, Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. declined to comment.
Congress is weighing proposals to reform executive compensation and revive Depression-era regulations that limit banks’ risk-taking.
Pelosi Review
“While we have not seen any specific language from the administration, Congress will certainly examine any serious proposals to lower the deficit and recoup even more” of the TARP funds used in last year’s bailout, said Nadeam Elshami, a spokesman for House Speaker Nancy Pelosi, a California Democrat.
New York Attorney General Andrew Cuomo sent letters to Charlotte, North Carolina-based Bank of America, Goldman Sachs Group Inc. and six other U.S. finance companies demanding information on executive compensation, his office said today.
Cuomo is seeking a description of each firm’s 2009 bonus pool, how it was established, how compensation is tied to performance and how the bonus pools have changed as a result of receiving or repaying taxpayer bailout funds.
A bonus tax in Britain threatens to drive as many as 9,000 bankers out of the U.K., London Mayor Boris Johnson said today.
The levy, which will be paid by banks that offer bonuses of more than 25,000 pounds ($40,400), along with a new 50 percent rate of tax on the incomes of all British residents earning more than 150,000 pounds, may permanently damage London’s competitiveness, Johnson said in a statement.
Not ‘Right Way’
John Thain, the former chief executive officer of Merrill Lynch & Co., said in a Bloomberg Television interview today that new taxes are “not necessarily the right way” to resolve the problem of banks becoming “too big to fail.”
Treasury Secretary Timothy Geithner has said he expects the government to be repaid for the funds put into banks at a profit. The Treasury is unlikely to recover all of the money put into rescues of General Motors Co., Chrysler Group LLC and insurer American International Group Inc., Geithner said last month.
Obama said he was considering “selective” use of money from TARP to boost U.S. job growth and reduce the deficit.
The administration also is continuing to prod financial firms to tie bonuses to the long-term health of the company by giving the bulk of such compensation in stock as a way to limit risks, Gibbs said.
“There are folks that just continue not to get it” on Wall Street, Gibbs said. Firms that pay large bonuses to executives risk raising public anger, he said.
Still, he said, “there’s a limit to what the president can do” in limiting compensation at firms that aren’t getting government assistance.
Jan. 11 (AFP) President Barack Obama may propose a fee on financial-services companies as a way to fulfill a vow on cutting the budget deficit in half, administration officials said.
The officials declined to give specifics about how the fee would be structured. One official, who wouldn’t be identified by name because the proposal is still being discussed, said it may be included in the administration’s budget to be released next month. The proposal won’t include a tax on Wall Street bonuses or financial-services transactions, Politico reported today, citing unidentified officials.
The U.S. budget deficit surged to $1.4 trillion last year in part because of bank bailouts paid for by taxpayers. Profits at finance companies, which begin reporting earnings later this week, have since rebounded and may triple by 2011, according to analyst surveys compiled by Bloomberg. Bank of America Corp., the biggest U.S. lender, said last week it expects to pay record bonuses to some investment bankers.
“The president has talked on a number of occasions about ensuring that the money that taxpayers have put up to rescue our financial system is paid back in full,” White House press secretary Robert Gibbs said without commenting on Obama’s budget plans.
Obama will propose a way to recoup additional funds and among the options is a levy on financial institutions, one of the administration officials said.
Banks repaid the U.S. $165 billion last year, letting the government recoup about two-thirds of its total investment in the banking system through the $700 billion financial rescue, according to a U.S. Treasury Department report released today.
Fees, Interest, Dividends
The Troubled Asset Relief Program also collected $12.9 billion in fees, dividends and interest, the Treasury said. So far, the U.S. has made an 8 percent return on its bank investments, a Treasury official told reporters.
“We have a lot of concerns, and hopefully our concerns come from things that we have not seen that will not be incorporated,” Wayne Abernathy, executive vice president of the American Bankers Association, said in a telephone interview.
A fee would create a “real fairness issue,” since banks are concerned they’ll be forced to pay for parts of bailout that “didn’t work” in addition to paying an “excellent” return to the Treasury, Abernathy said.
Public sentiment has turned against last year’s government rescue of the financial-services industry. Almost two-thirds of Americans believe bailing out the banks was a bad idea, a Bloomberg National Poll taken Dec. 3-7 showed.
Stricter Rules Backed
Just over half of respondents said banks should be subject to stricter regulation and 31 percent would allow troubled banks to fail. The poll’s margin of error was plus or minus 3.1 percentage points.
“There’s a lot of public resentment of the fact that bonuses are being paid, and a lack of accountability,” said Andrew Kohut, director of the Pew Research Center in Washington.
Representatives for Bank of America, Citigroup Inc., Wells Fargo & Co. and JPMorgan Chase & Co. declined to comment.
Congress is weighing proposals to reform executive compensation and revive Depression-era regulations that limit banks’ risk-taking.
Pelosi Review
“While we have not seen any specific language from the administration, Congress will certainly examine any serious proposals to lower the deficit and recoup even more” of the TARP funds used in last year’s bailout, said Nadeam Elshami, a spokesman for House Speaker Nancy Pelosi, a California Democrat.
New York Attorney General Andrew Cuomo sent letters to Charlotte, North Carolina-based Bank of America, Goldman Sachs Group Inc. and six other U.S. finance companies demanding information on executive compensation, his office said today.
Cuomo is seeking a description of each firm’s 2009 bonus pool, how it was established, how compensation is tied to performance and how the bonus pools have changed as a result of receiving or repaying taxpayer bailout funds.
A bonus tax in Britain threatens to drive as many as 9,000 bankers out of the U.K., London Mayor Boris Johnson said today.
The levy, which will be paid by banks that offer bonuses of more than 25,000 pounds ($40,400), along with a new 50 percent rate of tax on the incomes of all British residents earning more than 150,000 pounds, may permanently damage London’s competitiveness, Johnson said in a statement.
Not ‘Right Way’
John Thain, the former chief executive officer of Merrill Lynch & Co., said in a Bloomberg Television interview today that new taxes are “not necessarily the right way” to resolve the problem of banks becoming “too big to fail.”
Treasury Secretary Timothy Geithner has said he expects the government to be repaid for the funds put into banks at a profit. The Treasury is unlikely to recover all of the money put into rescues of General Motors Co., Chrysler Group LLC and insurer American International Group Inc., Geithner said last month.
Obama said he was considering “selective” use of money from TARP to boost U.S. job growth and reduce the deficit.
The administration also is continuing to prod financial firms to tie bonuses to the long-term health of the company by giving the bulk of such compensation in stock as a way to limit risks, Gibbs said.
“There are folks that just continue not to get it” on Wall Street, Gibbs said. Firms that pay large bonuses to executives risk raising public anger, he said.
Still, he said, “there’s a limit to what the president can do” in limiting compensation at firms that aren’t getting government assistance.
AFP
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