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Obama Announces Details Of New Bank Tax

by Leroy Baker,, New York

18 January 2010

US President Barack Obama has announced proposals for a new "Financial Crisis Responsibility Fee" to be imposed on the debt of the largest financial firms "until the American people are fully compensated for the extraordinary assistance they provided to Wall Street."

Describing the USD700bn bank bail-out scheme, the Troubled Asset Relief Program (TARP), as "a distasteful but necessary thing to do," Obama explained that despite many dire predictions, most of that money has been recouped, but that "most" is not enough.

"My commitment is to recover every single dime the American people are owed," the President announced on January 14. "We want our money back, and we're going to get it. And that's why I'm proposing a Financial Crisis Responsibility Fee. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers."

The fee will be assessed at "approximately" 0.15% of a bank's covered liabilities per year. The fee is intended to go into effect on June 30, 2010 and would last 10 years, although it could remain in place for longer if the costs associated with the TARP have not been fully recouped by then.

The fee will be imposed on the debts of financial firms with more than USD50bn in consolidated assets and will apply to domestic companies and the US subsidiaries of foreign firms. For those firms which are headquartered in the US, the fee will apply to global liabilities.

Obama predicts that 60% of the revenues from the fee will be reaped from the ten largest banking institutions. The President also argues that the tax will discourage excessive leverage because it will most affect those institutions with the highest levels of debt.

"We cannot go back to business as usual," the President continued. "And when we see reports of firms once again engaging in risky bets to reap quick rewards, when we see a return to compensation practices that seem not to reflect what the country has been through, all that looks like business as usual to me."

Analysts expect that the fee will affect more than a dozen foreign banks with significant operations in the US, including the UK's Barclays Bank, HSBC and Royal Bank of Scotland which, together, could end up paying about USD11bn to the US Treasury.

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