The Financial Crisis Responsibility Fee:

Quote :

"The fee the President is proposing would: * Require the Financial Sector to Pay Back For the Extraordinary Benefits Received: Many of the largest financial firms contributed to the financial crisis through the risks they took, and all of the largest firms benefitted enormously from the extraordinary actions taken to stabilize the financial system. It is our responsibility to ensure that the taxpayer dollars that supported these actions are reimbursed by the financial sector so that the deficit is not increased. * Responsibility Fee Would Remain in Place for 10 Years or Longer if Necessary to Fully Pay Back TARP: The fee – which would go into effect on June 30, 2010 – would 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. * Raise Up to $117 Billion to Repay Projected Cost of TARP: As a result of prudent management and the stabilization of the financial system, the expected cost of the TARP program has dropped dramatically. While the Administration projected a cost of $341 billion as recently as August, it now estimates, under very conservative assumptions, that the cost will be $117 billion—reflecting the $224 billion reduction in the expected cost to the deficit. The proposed fee is expected to raise $117 billion over about 12 years, and $90 billion over the next 10 years. * President Obama is Fulfilling His Commitment to Provide a Plan for Taxpayer Repayment Three Years Earlier Than Required: The EESA statute that created the TARP requires that by 2013 the President put forward a plan “that recoups from the financial industry an amount equal to the shortfall in order to ensure that the Troubled Asset Relief Program does not add to the deficit or national debt.” The President has no intention of waiting that long. Instead, the President is fulfilling three years early his commitment to put forward a proposal that would – at a minimum – ensure that taxpayers are fully repaid for the support they provided. * Apply to the Largest and Most Highly Levered Firms: The fee the President is proposing would be levied on the debts of financial firms with more than $50 billion in consolidated assets, providing a deterrent against excessive leverage for the largest financial firms. By levying a fee on the liabilities of the largest firms – excluding FDIC-assessed deposits and insurance policy reserves, as appropriate – the Financial Crisis Responsibility Fee will place its heaviest burden on the largest firms that have taken on the most debt. Over sixty percent of revenues will most likely be paid by the 10 largest financial institutions. "

http://www.whitehouse.gov/the-press-office/president-obama-proposes-financial-crisis-responsibility-fee-recoup-every-last-penn


This is such a great tax. We're taxing those who benefited most from the bailout, recovering our money, and slightly discouraging the type of behavior that caused the crisis.

1/15/2010 10:13:42 AM

on the surface, I agree with the first 3 points. Id like to read a little more about last one though...am I wrong or would it not discourage large banks from loaning money? precisely what we DONT need.

what about the banks/firms that were forced to take TARP money? would they also be included?

1/15/2010 10:22:14 AM

this is just a money grab from the goverment.

the inclusion of a company is not related to anything but their size.
this will have the biggestest effect on the companies with the most assets.

The government realizes that the biggest offenders are not the ones that are most able to pay so that is not their primary target.

They are aiming for where the money is.

-1 for another terrible idea that will again likely have costs passed on to the tax payer

1/15/2010 11:12:32 AM

There shouldn't have been a bailout in the first place

1/15/2010 11:37:43 AM

Quote :

"idea that will again likely have costs passed on to the tax payer"

please explain. maybe i'm missing something.

this tax in particular, in my not so humble opinion, will not be passed on to the consumer. it will tax excessive leverage. if you're too big to fail, you're too big to take on too much debt.

1/15/2010 11:38:23 AM

odd

1/15/2010 11:51:12 AM

This would have all been a lot simpler if we had just allowed companies to go bankrupt. That's what needs to happen. Instead, we try to legislate our way out of this whole, and it's an endless stream of bills that will supposedly "fix" the problem.

1/15/2010 11:51:55 AM

I still say "to big to fail" is a crock of shit.

1/15/2010 12:21:03 PM

Quote :

"please explain. maybe i'm missing something. this tax in particular, in my not so humble opinion, will not be passed on to the consumer. it will tax excessive leverage. if you're too big to fail, you're too big to take on too much debt. "

When would it ever be realistic to expect a company to say ok we'll just eat this cost and turn a lower profit? Not to mention the investor ( IE baby boomer trying to retire) - stock price is generally a measure of earnings potiential of a company. So if the company eats the cost it will hurt (taxpayer) retirement funds. If they pass on the cost it will go into higher (taxpayer) rates and fees.

And this still does not focus the biggest tax on the biggest offenders (AIG, GM, Chrysler), so i don't know how you can operate under the guise of taxing "excessive leverage." It's a money grab from from the largest companies with the most assets on their books.

1/15/2010 12:25:44 PM

Quote :

"When would it ever be realistic to expect a company to say ok we'll just eat this cost and turn a lower profit?"

In a competitive market?

1/15/2010 12:35:09 PM

^ And what part of a banking industry propped up with government gifts and handouts, filled with "too big to fail" companies that still have massive amounts of shit on their books do you consider competitive? The competition to get the most lobbyists?

1/15/2010 1:09:00 PM

Quote :

"It's a money grab from from the largest companies with the most assets liabilities on their books."

there

1/15/2010 1:16:21 PM

^ hopefully you're just being funny there, however your earlier posts would have me believe that you are serious.

A stream of income with property as collateral is not considered a liability nor is the government defining it as such.

A lot of people don't seem to understand where their money flows when they use it. You (taxpayer) will lose on this either way. The only winner will be the government with the mismanagement of the newly acquired funds.

I would ask everyone to take a hard look at where the revenue from this tax is going to be directed. I would want to know in great detail where/how they are going to use the money. Seems like smoke and mirrors rather than a real fix.

1/15/2010 1:36:09 PM

ok, i guess i need to read the actual legislation before i say any more.

from what little i know of this so far, it actually seems like a tax on leverage, not assets.

i'm going off of this until something from the legislation is posted that proves otherwise:

Quote :

"The fee the President is proposing would be levied on the debts of financial firms with more than $50 billion in consolidated assets, providing a deterrent against excessive leverage for the largest financial firms. By levying a fee on the liabilities of the largest firms – excluding FDIC-assessed deposits and insurance policy reserves"

feel free to post text from legislation saying the contrary..


as for the companies that "pass on the cost" to the consumer, this is good for the companies that don't need to pass that cost on.

like i said, you're too big to lever up so much, DON'T lever up so much.

i will say, this may raise the overall cost of capital (as in WACC [weighted average cost of capital] when considering NPV [net present value] & IRR [internal rate of return] in financial decisions), until the $117 billion is paid back.

if WACC is higher for firms in general, FCF (free cash flow) from profits that feeds into NPV decisions will need to be higher. this is done primarily in two ways (1) retain pricing power (2) increase efficiencies.

...i don't have time to discuss every single iteration and cascade of consequences this sets off, nor am i one to put political ideology ahead of practical reality, but from what i know fo this, i do think this is a good idea in recovering the outstanding $117 billion owed to the taxpayer.

i know many of you Rick Santelli's of the world will hate this, and everything else the evil gubment does... have fun hearing yourself shout.. and do let it be known in the polls in 2010.




[Edited on January 15, 2010 at 2:01 PM. Reason : ]

1/15/2010 1:40:09 PM

Quote :

"levied on the debts of financial firms with more than $50 billion in consolidated assets"

love the implication that you can't be excessively leveraged with out having more than $50 billion in assets. this will surely work.

Quote :

"i will say, this may raise the overall cost of capital (as in WACC [weighted average cost of capital] when considering NPV [net present value] & IRR [internal rate of return] in financial decisions), until the $117 billion is paid back. if WACC is higher for firms in general, FCF (free cash flow) from profits that feeds into NPV decisions will need to be higher. this is done primarily in two ways (1) retain pricing power (2) increase efficiencies. ...i don't have time to discuss every single iteration and cascade of consequences this sets off, nor am i one to put political ideology ahead of practical reality, but from what i know fo this, i do think this is a good idea in recovering the outstanding $117 billion owed to the taxpayer. i know many of you Rick Santelli's of the world will hate this, and everything else the evil gubment does... have fun hearing yourself shout.. and do let it be known in the polls in 2010. "

We don't need an econ class - like you said lets be practical here.
You're arguement on WACC is assuming a normally functioning economy. But lets say we do "increase efficiency" this most certainly means cutting more jobs - taxpayer loses again.

I don't know who Rick Santelli is, but I don't know how you can still call this a "good idea." You are "recovering" taxpayer money disproportionately from those that spent it. And you still have no idea what is going to be done with the recovered money - nor do you seem to care. My guess is you will end up paying for this twice after it's pissed away in bureaucracy.

Show me how this will benefit the taxpayer and I might be on board.


[Edited on January 15, 2010 at 2:17 PM. Reason : .]

1/15/2010 2:01:24 PM

you CAN be massively leveraged without $50 billion in assets, but the line has to be drawn somewhere. $50 bill is fine with me

FDIC secured deposits are not debt. deposits that are deployed as working capital do not apply. borrowing and deploying as working capital is debt/leverage.

either you get taxed on the net sum of the leverage deployed as working capital, or you get taxed on the profit generated from leveraged working capital - like i said, i haven't read the actual law.

1/15/2010 2:07:30 PM

Quote :

"But lets say we do "increase efficiency" this most certainly means cutting more jobs - taxpayer loses again. ... And you still have no idea what is going to be done with the recovered money - nor do you seem to care. My guess is you will end up paying for this twice after it's pissed away in bureaucracy"

point taken, but to the tune of recovering $117 billion, i think maybe this is the least worst way, or atleast a 'good' way to do it.

Rick Santelli is the dude on CNBC who reports from the CBOE & Merc pits. he's always yelling, and he's a big time tea party animal



[Edited on January 15, 2010 at 2:25 PM. Reason : ]

1/15/2010 2:20:01 PM

Quote :

"point taken, but to the tune of recovering $117 billion, i think maybe this is the least worst way, or atleast a 'good' way to do it. "

I just want to make sure it's worth recovering. It should be clearly understood by everyone that taxes are going to increase and we will be paying for this one way or another in the coming years.

I just don't see where adding an additional cost of business fits into job creation or improving a companies financial outlook in the near term so that it's stock value / dividends can come back for retirees.

I need to see the direct benefit of this tax - because all i can see is a direct consequence.
All I have been told is "we are going to get back your money"
Ok what are you going to do with it? Will I be any better off or will you just find a new way to spend it?

1/15/2010 2:47:25 PM

Quote :

"And this still does not focus the biggest tax on the biggest offenders (AIG, GM, Chrysler), so i don't know how you can operate under the guise of taxing "excessive leverage." It's a money grab from from the largest companies with the most assets on their books."

Actually, the fact that three of the biggest offenders (AIG, GM, Chrysler) who were exempt did bother me as well. I have no trouble smacking around the banks to get back our TARP funds, but given that a lot of it went to industries outside the banking sector, it does seem to be a bit unfair that those three companies in particular get away for their own gross incompetency. Then again, unlike the banks, those three are so fragile at this point that a fee on them would probably destroy them.

1/15/2010 4:27:42 PM

oh no that would be awful! Then who would the unions vote for???

1/15/2010 4:29:54 PM

hmmm. if we are going after banks who took TARP money, why is AIG exempt? Why are Fannie and Freddie exempt? Why is GM exempt? By they way, you do know that this tax will ultimately be paid by the people, right?

Quote :

"I still say "to big to fail" is a crock of shit."

Isn't it odd that we addressed the "too big to fail" situation by... letting some of the banks get bigger? BRILLIANT!

1/15/2010 6:12:00 PM

This is a power game. I can imagine the banks went to Washington and touted the end of the American economy as we know it if you don't bail us out. They also pushed for subsidies to housing and stimulus programs. These were schemes pushed by Wall Street via their lobbyist. But the banks have been making this administration look like fools and are causing the poll numbers to drop with the massive bonuses and no reprieve in unemployment. So, it's a play to help tap into some of the populist anger and to attempt to let Wall Street know that he didn't appreciate being made to look like a clown.

Note, I'm ruling out the more nefarious scheme that in the back rooms he is sending them messages (via Geithner and Summers) that so long as they keep the campaign donations rolling in (and Wall Street gave more to him than McCain) then he isn't going to push for anything too damaging. Note how soft he is on actually calling for some sort of movement to shrink the size of these companies.

[Edited on January 15, 2010 at 6:33 PM. Reason : .]

1/15/2010 6:32:42 PM

i know, right? $180billion dollar bux in bonuses last year. 1. Hundred. And. 80. Billion. Dollar. Bux.

1/15/2010 6:36:05 PM

Here is the thing though, you say stuff like this

Quote :

"Isn't it odd that we addressed the "too big to fail" situation by... letting some of the banks get bigger? BRILLIANT!"

And generally speaking, on the majority, the folks in congress simply can't really grasp complex economic problems, and they especially can't be expected to grasp them under time pressure and with the stock market (and later the economy via job losses) melting down. How could they? So all they could do is turn to their team of advisers and take input from the people they assume know more about the situation that we do.

This is where those ordinary citizens of us get pissed and seem to hate capitalism. Because we know that those out to make a profit had the ear of the politicians and did what was in their best interests, not the best interests of the country. They had congress by the balls and they knew it and they pushed for a plan that was beneficial to them.

1/15/2010 6:58:02 PM

Looks like the government decided the best way to deal with this new debt was to surprise the banks by acting like insurance companies and raising their premiums.

That's gotta sting like a bitch. If this was gonna remain a one-shot bill/tax, I'd say go for it. I was against a massive bailout, but since they've done it they damn well better get some of the goddamn money back because I don't see the wisdom in giving my money to the banks it's because of their fiscal irresponsibility that they need the money when they will not return the same favor to me.

The libertarian in me is completely torn right now. The tax is just because the companies didn't fucking deserve to be saved and all the huge benefits bestowed upon them by the government intervention, but the tax and bailout are ridiculous examples of government intervention in economic matters that they think can be fixed by throwing money at the problem.

1/15/2010 8:37:16 PM

Quote :

"please explain. maybe i'm missing something. this tax in particular, in my not so humble opinion, will not be passed on to the consumer. it will tax excessive leverage. if you're too big to fail, you're too big to take on too much debt. "

Can you really be this naive?

Either one of two things are going to happen, or maybe a mixture of both.

1) These big banks (which are mostly publicly held) raise fees b/c stockholders demand a certain return. The customers pay...effectively taxing the American public.

2) These big banks (still publicly held) don't raise fees, and their profits fall due to the tax increases. As a result stock prices slip. Which you probably think, so what? But wait, what you don't realize is how many people are invested in large publicly held companies through these things called 401ks and these things called pensions. So, the falling stock prices result in a loss in investment value and...effectively taxes the American public.

So really, Obama is using political rhetoric to cover up the fact that he is raising taxes. When he says "repay the American taxpayers"...he really means "the gubment wants more tax revenue bitches".

1/15/2010 8:59:26 PM

Quote :

"2) These big banks (still publicly held) don't raise fees, and their profits fall due to the tax increases. As a result stock prices slip. Which you probably think, so what? But wait, what you don't realize is how many people are invested in large publicly held companies through these things called 401ks and these things called pensions. So, the falling stock prices result in a loss in investment value and...effectively taxes the American public."

It's a 0.15% fee on some of their worth.

So at most stock prices will fall by a fraction of a fraction of a percent.


Here's a third option: the companies/shareholders realize that they're not going to be left alone until they come to terms with the fact that they're over-rewarding their executives, and stop the ridiculous bonuses.

1/16/2010 7:16:34 AM

Quote :

"Here's a third option: the companies/shareholders realize that they're not going to be left alone until they come to terms with the fact that they're over-rewarding their executives, and stop the ridiculous bonuses find a clever way to reward them even more that bypasses tax laws."

The rich and powerful aren't going to tolerate losing their riches just because some idiots in the government think they can restrict their income or poo-poo their actions enough that these executives feel bad about earning tons of money for mismanaging a business.

1/16/2010 9:52:18 AM

Quote :

"Here's a third option: the companies/shareholders realize that they're not going to be left alone until they come to terms with the fact that they're over-rewarding their executives, and stop the ridiculous bonuses."

i am very tired of the whining over bonuses. bonuses are not the problem.

1/16/2010 10:21:03 AM

Would you still need the deterrent to leverage if you got rid of all the incentives for leverage in the tax code?

Would you still need to put the too big to fail banks on this debt diet if they knew they'd be allowed to fail? You know, like the president says: Let them know they can't keep going deeper in the hole and "expect that next time, American taxpayers will be there to break their fall."

1/17/2010 11:20:47 AM

After looking into it a little more, I think this is just a dog and pony show. The tax they're talking about with this is pretty unsubstantial. Obama just wants to make it appear as though he's "getting back at Wall Street."

No one really asks why these banks are so leveraged, but it's because of the Fed. They're lending this "money" for almost free, so there's no risk involved for the banks. The Fed could raise interest rates to 3-5% and that would way more of a "tax" than the one being proposed.

1/17/2010 12:46:36 PM

http://money.cnn.com/2010/01/13/pf/taxes/tax_changes/index.htm

Quote :

"Bring in more Medicare tax Lawmakers are considering ways to boost how much high-income people pay in Medicare tax to help pay for health reform. In the Senate health bill, one provision would raise Medicare taxes on income over $200,000 ($250,000 for couples). Currently, the Medicare payroll tax is 2.9% on all wages - with the worker and his employer each paying 1.45%. Under the Senate bill, these high-income workers would pay 2.35%. In addition, they may expand the reach of the Medicare tax, which currently only applies to wages and salaries. Under consideration: subjecting unearned income such as dividends to the Medicare tax as well."

I am sorry but this is the worst idea on this page. I know liberals like to wave their angry fist at the evil rich people but the medicare tax should remain capped at the first $90,000 of earned income. There are more than enough taxes effecting high income or those with high net wealth. Why should these people though be burdened with funding the medicare system above and beyond the citizens that will likely rely on it. The truth is many of these individuals will have enough money by retirement to never need or ever qualify for medicare. I always considered medicare an involuntary deduction on all peoples to fund elderly care for themselves that they are often too irresponsible to save for themselves.

Of all the reasons and ways to "get after teh rich" increasing the medicare tax is pretty high up there on the dumbest.

1/17/2010 3:34:06 PM

Quote :

"Can you really be this naive? Either one of two things are going to happen, or maybe a mixture of both. 1) These big banks (which are mostly publicly held) raise fees b/c stockholders demand a certain return. The customers pay...effectively taxing the American public. 2) These big banks (still publicly held) don't raise fees, and their profits fall due to the tax increases. As a result stock prices slip. Which you probably think, so what? But wait, what you don't realize is how many people are invested in large publicly held companies through these things called 401ks and these things called pensions. So, the falling stock prices result in a loss in investment value and...effectively taxes the American public. So really, Obama is using political rhetoric to cover up the fact that he is raising taxes. When he says "repay the American taxpayers"...he really means "the gubment wants more tax revenue bitches"."

ok.. good for the smaller & regional banks. or am i being naive again?

there is little to nothing i can say when all the those against this can only see this through the lens of their political beliefs.

have fun you people!

1/18/2010 11:18:53 AM

Quote :

"No one really asks why these banks are so leveraged, but it's because of the Fed. They're lending this "money" for almost free, so there's no risk involved for the banks. The Fed could raise interest rates to 3-5% and that would way more of a "tax" than the one being proposed."

1. And unemployment would skyrocket

2. This definitely would be passed onto consumers.

1/18/2010 11:58:46 AM

I love the idea... take back the money. But don't bullshit me and say that you're repaying the tax payers if the taxpayers don't get shit back. Lower my taxes or send me a check. Otherwise this is another government money grab so they have another irresponsible social project.

oh yeh, and raise the federal intrest rate. banks are getting risk free loans and not passing on the savings at all. banks have 0.5% interest rate.. but I, with a 770 credit score, never late, never paid below minimum amount, still have credit cards with 19% interest... something is amiss here.

[Edited on January 18, 2010 at 12:25 PM. Reason : .]

1/18/2010 12:23:07 PM

^^they aren't lending right now because the rate is so low. They take the money for free from the fed, then but it in low-yield (norisk) investments. None of that helps the consumer, but it makes the banks lots of fucking money (which they've passed on in the form of bonuses).

Increasing the fed rate over these low yield investments will require the banks to invest in riskier, but higher yielding places like business capital.

Combine that with legislation that either bans the fed from future bailouts and/or breaks up the banks who got tarp.

[Edited on January 18, 2010 at 12:23 PM. Reason : ^^]

1/18/2010 12:23:16 PM

Quote :

"1. And unemployment would skyrocket 2. This definitely would be passed onto consumers."

You're absolutely right. They can't keep rates at 0 forever, though. We can keep them there if we want to have our own lost decade (if the 2000s wasn't it, already). We're not going to start seeing the massive gains in productivity that we need to see under current conditions, though. We're trading a pretty bad recession now for a really bad depression later.

[Edited on January 18, 2010 at 12:38 PM. Reason : ]

1/18/2010 12:35:26 PM