House-Senate Oversight Chairs Support Obama Proposed Fee on Large Banks and Securities Firms

Senate Banking Committee Chairman Chris Dodd and House Financial Services Chair Barney Frank strongly support the Obama Administration’s proposed Financial Crisis Responsibility Fee that would require the largest and most highly leveraged Wall Street firms to pay back taxpayers for the extraordinary assistance provided so that the TARP program does not add to the deficit. Senator Dodd also said that the committee may also consider additional means to limit executive compensation as part of the financial reform legislation it is working on.

Chairman Frank said that President Obama’s action fully complies with taxpayer protection language of the Economic Emergency Stabilization Act, which requires the President to put forward a plan that recoups from the financial industry an amount equal to the shortfall in order to ensure that the TARP does not add to the deficit or national debt. Mr. Frank said that he is confident that the House will act on the measure soon,

Covered institutions on which the fee would be assessed include firms that were insured depository institutions, bank holding companies, and securities broker-dealers as of January 14, 2010, or that become one of these types of firms after January 14, 2010, and who were recipients and/or indirect beneficiaries of aid provided through the TARP, the Temporary Liquidity Guarantee Program, and other programs that provided emergency assistance to limit the impact of the financial crisis.

The fee, which would take 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 report after five years on the effectiveness of the fee as well as its progress in repaying projected TARP losses.

The fee 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, the Financial Crisis Responsibility Fee will place its heaviest burden on the largest firms that have taken on the most debt.

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