Barack Obama will propose a new tax on Wall Street’s biggest banks today, in an effort to recoup losses from the bailout, give smaller banks a boost against the behemoths, and curb the excessive risk-taking that caused the financial melt-down. The firms, 50 big-time banks, insurers and traders, would be charged a “Financial Crisis Responsibility Fee” of $1,500 for every million they borrow, discouraging high-leveraged risk-taking. It’s designed to raise $90 billion over 10 years, the expected losses from the TARP.
While most of these banks have paid back the taxpayer dollars they were loaned, the White House sees them as benefiting from the broader bailout, which is still in the red, and sharing responsibility for creating the crisis. “This is essentially the least they could do,” one senior administration official tells the Washington Post. The banks have threatened to pass the costs on to their customers, but the administration thinks confining the tax to big banks will force them to eat the costs to compete with smaller ones. The proposal will likely change in Congress, however, with many seeking to make it tougher, or tax bonuses directly.