Happy Tuesday everyone. It is another gorgeous day in Southern California! While the rest of the country is dealing with terrible ice storms, we are bracing ourselves for temperatures in the 60's today!!! How the heck are we going to survive?! :D
I found this article extremely interesting as I was one of the very disgruntled taxpayers wondering why our tax dollars was going to these ridiculous bank execs as bonuses. Here is the article from the Wall Street Journal....
JANUARY 12, 2010
Banks Brace for Bailout Fee
White House Seeks to Recoup Cost of TARP; Big Bonuses Put Lenders on Defensive
WASHINGTON -- The Obama administration is aiming to hit banks with a fee to recoup losses associated with the government's bailout of financial firms and the auto industry, administration officials say.
The White House hopes the fee will soothe the public's anger at financial firms. Most big banks that received public funds have repaid the government, but the industry is seen by many as having survived thanks to taxpayer support, and is now enjoying a profit rebound as the economy struggles. This month, many large banks will resume paying big bonuses to employees.
Much remains uncertain about how such a fee would work. The administration is wrestling with who should pay, when it should be implemented and what would happen if banks pay more than the government-bailout program ultimately loses. Auto makers aren't currently targets of the fee idea.
Even though the proposal is still under discussion, it is expected to be included in the White House's budget, due next month, if only conceptually. It's expected to cost large banks billions of dollars and could also affect bank customers if firms pass along the cost.
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One option under consideration involves placing a fee on a bank's liabilities, a number that theoretically represents the amount of risk a bank takes on, according to officials familiar with the matter. That approach would also have the effect of tamping down banks' risky behavior, another administration goal. Another option would be to target bank profits, these people said.
It's unclear precisely who would be subject to the fee. A person familiar with the matter said it's unlikely for now to target auto companies or American International Group Inc., all of which are still struggling. Homeowners who benefited from government-funded housing help also wouldn't pay the fee.
A person familiar with the matter said it would make little sense to impose a fee on auto makers or AIG right now: The government owns such a large chunk of them, it would essentially result in the government paying itself.
Some within the administration believe targeting banks is justified because they benefited the most from the overall financial rescue and should bear the brunt of helping the government recoup the cost.
The proposal comes as the White House and many banks are locked in a feud about whether financial companies are doing enough to revitalize the economy.
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The fee would likely be designed to avoid hitting certain segments of the financial industry, such as community banks, many of which are still struggling. The administration is trying to structure the fee so that it can't be passed along to bank customers already struggling in the weak economy, but officials concede that's hard to do. In other areas, such as overdraft fees and credit cards, banks already are passing costs of new legislation on to their customers.
"In our industry, costs are typically passed along to institutions and individual investors, so the burden will likely fall on them," said Timothy Ryan, president of the Securities Industry and Financial Markets Association. Major banks declined to comment.
The administration has been talking for months about recouping government funds likely lost through the $700 billion Troubled Asset Relief Program, as it is required to do under the legislation that created the program. The Treasury Department estimates losses from the program at $120 billion, though administration officials believe the ultimate cost will be much lower.
The fee, which would require congressional approval, could hit big banks that have already repaid their TARP funds with interest. The money would be used to compensate for losses in other areas, such as loans to Detroit's auto makers and funds used to prop up the housing sector and giant insurer AIG.
Bankers view the proposal as the latest assault on an industry still recovering from the financial meltdown. Although revenue at some big banks has returned to pre-crisis levels, the industry more broadly remains troubled, with many more banks expected to fail.
"To impose yet another burden on the industry would obviously decrease their ability to lend," said Edward Yingling, president of the American Bankers Association, a trade group. Bankers say they've already contributed through sums they paid to escape TARP and fees levied by the Federal Deposit Insurance Corp. to build up its deposit-insurance fund.
House Financial Services Committee Chairman Barney Frank (D., Mass.) said legislation that created TARP mandated that the government recoup its costs by 2013. Since the program is winding down faster than expected, a levy now would be appropriate.
"Given the mood of the country," he said, "it is essential that we do it. That was part of the deal." He declined to get into specifics about such a levy.
He said it would be unfair to make banks subsidize money given to auto companies, which could eventually account for the lion's share of lost bailout funds. It would be "premature" to force repayment from General Motors Co. and Chrysler LLC, he said, but some repayment mechanism for the auto companies should be considered.
White House spokesman Robert Gibbs on Monday declined to say whether the budget will include a new fee on banks. He did say President Barack Obama wants to make sure taxpayers are repaid for the financial-sector bailout.
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