President Barack Obama’s proposed budget includes a smaller version of a fee he proposed last year that would be paid by U.S. financial institutions, including Bank of America Corp. and JPMorgan Chase & Co.
Under the budget plan released today in Washington, the fee would raise $30 billion over 10 years, down from $90 billion when it was first proposed last year.
Like last year’s proposal, the fee would apply to bank holding companies, thrift holding companies and broker-dealers with more than $50 billion in assets.
Even the smaller fee may face obstacles in Congress. The banking industry opposed the initial fee, which was introduced in January 2010. Steve Bartlett, president of the Financial Services Roundtable, a Washington-based trade group that represents the nation’s largest banks, said at the time the administration proposal was “strictly political.”
The administration initially proposed the fee to recoup the costs of the 2008 Troubled Asset Relief Program, as required under the law establishing the program. As many banks have paid back the money they received from the government, the estimated cost of the program has shrunk.
The Congressional Budget Office, which at one time estimated the program would cost $350 billion, has lowered its projection to as little as $25 billion. Of the $700 billion Congress authorized for TARP in 2008, $410 billion was disbursed.
Under the proposal released today, “covered liabilities” would be taxed at 7.5 basis points, with more stable sources of capital taxed at a discounted rate. The fee could be deducted for corporate income tax purposes and would be structured in a way that is “broadly consistent with the principles” agreed upon by leaders of other large economies, according to the plan.
One basis point is equivalent to 0.01 percentage point.
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