Financial Team

Ah, revenge is sweet. The Associated Press is reporting this morning the Obama administration is proposing to levy fees on bailed out banks to help lower the deficit.

I know I’m not happy about the “seven to eight” figure executive bonuses projected to be given to bailed out bankers this quarter. (For those of you who don’t like to write down zeros to figure out what eight figures means, it’s hundreds of millions of dollars.) How about all those extra fees baliout banks are piling on my checking and credit card accounts. Do you join me in feeling a bit resentful?

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 2008 law that created the Troubled Asset Relief Program (TARP) requires the president to seek a way to recoup unrecovered TARP money from financial institutions. It does not specify how the money should be recovered.

It might not be easy for any proposal to take effect immediately. The AP story quotes an official who states that “a levy now would be premature”. The reason: the law specifically states that recovery of funds must wait five years after the law was enacted.

Delays aside, should President Obama be successful in passing the levy, he will no doubt pick up some popularity points. No one is going to feel sorry for the banking industry should they be hit with the proposed fees.

Congress is also eager to capitalize on the idea, “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,” the AP article quotes Nadeam Elshami, a spokesman for Speaker Nancy Pelosi, D-Calif.

Won’t higher levies on banks just prompt banks to pass along the costs to consumers?

The supposed goal of the legislation is a fee that is not easily passed along to banking customers. The Politico is quoting top Obama administration officials as saying the proposal will stop short of a tax on financial transactions. The White House has decided against one proposal that had been discussed — a tax on compensation packages — as a measure that would be too easy to avoid.

What’s your opinion? Will the banks find a loop hole to pass on any fees that are assessed? Good idea or bad? Tell us about it by leaving a comment!

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Tags: Banks