Although, this plan is not my first choice, it’s about time Obama took the gloves off with the banksters.
President Obama laid down his proposal for a new tax on the nation’s largest financial institutions on Thursday, saying he wanted “to recover every single dime the American people are owed” for bailing out the economy
With both anti-Wall Street sentiment and the budget deficit running high, Democratic leaders on Capitol Hill welcomed the proposal, which could ultimately raise up to $117 billion to cover projected bailout losses. Republicans were uncharacteristically silent, their instinctive opposition to tax increases apparently checked by their fear of defending big bankers. And the financial industry lobby seemed splintered, with small community banks happily exempted.
The biggest question, then, might be whether liberals in Mr. Obama’s own party would press him to go even further than he and Democratic moderates wanted to go. About the same time that the president was announcing his plan at the White House, a group of House Democrats held a news conference to call for a 50 percent tax on bonuses exceeding $50,000 at banks that took bailout money.
The administration has opposed taxing bonuses in the past, saying shareholders should determine corporate pay policies. Mr. Obama, in his remarks, suggested that his proposal to tax some of banks’ assets could have the same effect, by forcing them to shrink the size of their bonuses in turn.
Flanked by his economic advisers at the White House, Mr. Obama spoke in some of his harshest language to date about the resurgent financial industry.
“We’re already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair,” he said. “That by some twisted logic it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.”
Mr. Obama continued, “What I say to these executives is this: Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities” — including by rolling back bonuses.
The proposed tax would apply to bank, thrift and insurance companies with more than $50 billion in assets and would start after June 30. It would not apply to certain holdings, like customers’ insured savings, but to assets in risk-taking operations. The levy would raise an estimated $90 billion over 10 years, according to the White House.
But it would remain in force longer if all losses to the bailout fund, the Troubled Asset Relief Program, were not recovered after a decade. The Treasury now projects that the losses from the $700 billion loan program, which was created in October 2008, could reach $117 billion, about a third of the loss that it projected last summer — an improved forecast that reflected the renewed strength on Wall Street.
The White House said that collecting $117 billion would take about 12 years, but Treasury officials said losses were likely to be smaller. Still, with postrecession deficits at levels unseen since World War II and Wall Street never broadly popular, the pressure on a future president and Congress to keep the tax in place is likely to be substantial. Administration officials did not outline any provision for having the tax expire once all the money is recouped.
Big banks object that most of them already have repaid the government with interest. The administration, anticipating that argument, called its tax a “financial crisis responsibility fee” aimed at those institutions whose risk-taking caused the problem in the first place.
The losses from the bailout fund are expected from money paid to rescue Chrysler and General Motors and the insurance giant American International Group, and from a program to help homeowners avert foreclosures. But big banks shared in the A.I.G. bailout, splitting about $60 billion to receive full repayment for their financial trades with the company.
Mr. Obama’s economic team began seeking a bank fee last August, even as the administration — and in particular the Treasury secretary, Timothy F. Geithner — was being attacked by critics on the left and right as too cozy with Wall Street. Criticism picked up last year after Mr. Geithner opposed an effort by the European Union to impose a global tax on financial transactions.
Mr. Geithner said such a tax would be passed through to customers. The administration now argues that big banks will not be able to pass on the costs of its levy without risking a loss of market share to rivals that are not subject to the tax.
The proposal, which Mr. Obama will include in his budget in February, would require Congress’s approval... [emphasis added]
Inserted from <NY Times>
I can understand Obama’s position that the setting of bonuses is the stockholders’ prerogative, not the government’s, so even though I have called for a tax on bonuses in the past, I recognize that crafting such a bill to apply to only banksters without effecting bonuses legitimately earned for innovative solutions in other industries would be difficult, because the Constitution disallows bills of attainder. However, I would prefer Yves solution to impose a windfall profits tax. This measure does not go far enough. Banksters need to be held criminally and civilly liable for the financial damage, in addition to the pain and suffering, they have caused everyday Americans. The banksters’ voracious greed in causing this crisis must not be overlooked. I’m inclined to support this plan, but only as a first step.