Obama Proposes ‘Financial Crisis Responsibility’ Fee

Posted by Orb Staff on January 15, 2010 No Comments
Categories : Residential Mortgage

President Obama announced Thursday that he will formally propose a Financial Crisis Responsibility Fee, which would require the largest financial services firms to reimburse taxpayers for support provided by the Troubled Asset Relief Program (TARP).

According to a Treasury announcement, the fee would help ensure TARP does not add to the national deficit. The fee would go into effect on June 30 and last at least 10 years. If the costs have not been recouped after 10 years, the fee would remain in place until they are paid back in full. In addition, the Treasury Department would be asked to report after five years on the effectiveness of the fee, as well as its progress in repaying projected TARP losses.

The proposed fee would aim to raise $117 billion over 12 years – $90 billion of which would be raised in the first 10 years.

Obama's proposed fee would be levied on the debts of financial firms with more than $50 billion in consolidated assets, which the administration suggests would provide a deterrent against excessive leverage for the largest financial firms.

By levying a fee on the liabilities of the largest firms – excluding Federal Deposit Insurance Corp.-assessed deposits and insurance policy reserves, as appropriate – the Financial Crisis Responsibility Fee would place its heaviest burden on the largest firms that have taken on the most debt. The Treasury estimates that 60% of revenues would most likely be paid by the 10 largest financial institutions.

Covered institutions would include firms that were insured depository institutions, bank holding companies, thrift holding companies, insurance or other companies that owned insured depository institutions, or securities broker-dealers as of Jan. 14, 2010, or that become one of these types of firms after that date. Both domestic firms and U.S. subsidiaries of foreign firms would be subject to the fee.

SOURCE: Treasury Department

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