Obama considers new fee on banks

Obama considers new fee on banks
PTI
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First Published: Tue, Jan 12 2010. 10 17 AM IST
Updated: Tue, Jan 12 2010. 10 17 AM IST
Washington: With Wall Street firms expected to announce bonuses running into billions for top executives, the Obama administration is contemplating levying new fees on financial companies and banks as part of efforts to recover the full cost of the bailout package to the banking sector.
The provision in this regard is expected to be included by US President Barack Obama when he rolls out his annual budget next month, media reports said.
Both The New York Times and The Washington Post reported quoting unnamed White House officials that such idea is on the menu of the President however details were not forthcoming.
“While we have made great progress in recouping a large portion of the investment, consistent with the law... the President will propose a way to recoup additional funds and one of the options is a levy on financial institutions,” the official told The Washington Post.
He said the general idea is to devise a levy that would help reduce the budget deficit, which is now at a level not seen since World War II.
“This would also discourage the kinds of excessive risk-taking among financial institutions that led to a near collapse of Wall Street in 2008,” officials told The Times.
According to The Post the idea of a fee on the nation’s biggest banks could be politically popular.
Such a fee would also demonstrate the administration’s eagerness to decrease the soaring federal deficit, according to aides familiar with the developing plan, it said.
However, the White House refused to comment on this. “I don’t have specifics to talk about what will be in the budget. We’ll do that certainly later in the month as we get closer to the budget,” Gibbs said when asked about it.
“I can simply say that the President has talked on a number of occasions about ensuring that the money taxpayers put up to rescue our financial system is paid back in full,” Gibbs told reporters.
He said Obama is against giving hefty bonuses to corporate executives under the present circumstances.
“Absolutely,” Gibbs said when asked if Obama gets visibly angry on hearing such news.
“I don’t know anybody, save for a few that work for those banks, that don’t get visibly angry and in reading those stories,” he said.
Gibbs said Obama has repeatedly pushed, and the House passed as part of their financial reform, a say on pay.
“We have greatly encouraged anybody that’s giving out bonuses and executive compensation to tie it not to short-term risk-taking but to long-term health of the company,” he said.
He said the administration favoured compensation in stock, that is vested over a series of years so that the health of the firm is first and foremost, “not short-term risks that might have people making different actions”.
However, there is a limit to what the President can do for firms that don’t receive assistance from the American government, he noted.
When asked is it fair to say they are just not listening to Obama, Gibbs said: “I think they are not listening to the American people”.
Gibbs said the President strongly believes that the financial straits the firms “was in many ways of their own doing”.
“... And the reason why the President has pushed financial reform is to ensure that we have rules of the road that doesn’t let the type of activity that caused this to happen to ever happen again,” he said.
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First Published: Tue, Jan 12 2010. 10 17 AM IST
More Topics: Obama | Banks | Fee | Stimulus package | Budget |