AP source: Obama considers levy for rescued firms
WASHINGTON (AP) -- Targeting an industry whose political deafness has vexed his administration, President Barack Obama is weighing recovering tax dollars from government-rescued financial institutions with a levy.
The proposed levy could put Obama on the popular side of public opinion that is decidedly against Wall Street and angry over shortfalls in a $700 billion bank bailout fund.
A senior administration official said Monday that Obama would seek modifications to the law that sent billions in bailout money in 2008 and 2009 to a flailing Wall Street that was approaching collapse. The government official spoke on the condition of anonymity to discuss the president's thinking.
The idea received an early boost from Speaker Nancy Pelosi, the top Democrat in the House, where there have been calls for a hefty tax on bank bonuses.
"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 for the taxpayers," said Nadeam Elshami, a spokesman for Pelosi, D-Calif.
The 2008 law that created the Troubled Asset Relief Program requires the president to seek a way to recoup unrecovered TARP money from financial institutions, but five years after the law was enacted. It does not specify how the money should be recovered.
An industry official said consideration of a levy now would be premature.
"Current law doesn't trigger this tax proposal for another four years," said Scott Talbott, chief lobbyist for the Financial Services Roundtable, an industry group for some of the largest financial firms.
"We look forward to seeing the details of the complexity of the formula, of who it's applied to and what the assessment is based on and when it is applied," he said.
Government officials have conceded that they don't expect to recoup billions in TARP money used to rescue insurance conglomerate American International Group Inc. and the auto industry. Banks have been repaying their infusions, in part to get out from under compensation limits imposed on the bailout recipients. Banks have also paid dividends from the government help.
The administration is projecting the losses to the government from the bailout program will be about $120 billion, most of it due to auto and AIG assistance.
According to the law, the status of the TARP fund must be assessed by late 2013, five years after it passed. "In any case where there is a shortfall," the statute says, "the President shall submit a legislative proposal that recoups from the financial industry an amount equal to the shortfall in order to ensure that the Troubled Asset Relief Program does not add to the deficit or national debt."
It is unclear how the administration would seek to recoup shortfalls due to TARP infusions into the auto industry or AIG. And any fee could potentially be imposed on banks that have already repaid their TARP infusions in full. Congress would have to approve any fee plan.
Discussion of a bank fee to reduce the federal deficit comes as the administration is preparing to submit its 2011 budget proposal next month and as Wall Street banks this month prepare to hand out near-record compensation for last year's performance.
Obama has been strident in his criticism of bankers, calling them "fat cats" last month in an interview that aired on the eve of their visit to the White House. With public anger over the bailout still strong, Obama has embraced populist rhetoric in an effort to shame bank executives into paying back the government more quickly and their executives less lavishly.