Obama structuring new fee on financial institutions to recoup TARP losses

President Barack Obama plans to raise as much as $120 billion by placing a new fee on financial institutions to help recoup losses from the Troubled Asset Relief Program (TARP).

The president ultimately plans to use the revenue generated from the fee to reduce the deficit and cover the $120 billion the Treasury Department will be losing from TARP. A White House official said the details on the fee will be contained in the 2011 fiscal budget that the president will submit to Congress in February. It isn’t clear yet whether this new fee will apply to all banks, or just those involved with the TARP fund losses.

Several structural options appear to be on the table:

• An income surtax
• An excise tax
• Fee pegged on the value of assets

The American Bankers Association (ABA) voiced concerns with the “fairness” of a fee targeted at a specific industry. In an interview, Wayne Abernathy, ABA executive vice president, said that an industry-specific fee would force banks to pay for parts of the bailout that didn’t work.

To date, banks repaid the U.S. $165 billion, about two-thirds of the government’s investment in the banking system.

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