The President to Wall Street: "We Want Our Money Back, and We're Going to Get It"

http://www.whitehouse.gov/blog/2010/01/14/president-wall-street-we-want-our-money-back-and-were-going-get-it

Read the Transcript | Download Video: mp4 (137MB) | mp3 (6MB) Discussing Wall Street executives' reaction to his proposed new fees on major banks, the President delivered a simple message: "Instead of sending a phalanx of lobbyists to fight this proposal, or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities."

Specifically, the President was announcing a proposal for a new Financial Crisis Responsibility Fee to be imposed on the debt of the largest financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street -- read the full fact sheet. Describing TARP as "a distasteful but necessary thing to do," the President explained that despite many dire predictions, most of that money has been recouped – but that "most" is not enough:

My commitment is to recover every single dime the American people are owed. And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people -- folks who have not been made whole, and who continue to face real hardship in this recession.

We want our money back, and we're going to get it. And that's why I'm proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers.

He explained that the new fee would only affect the largest firms, those with more than $50 billion in assets, but that it would be in place as long as it takes to make the money back.

He also explained how this fee ties into the larger new foundation he seeks to establish for our economy:

We cannot go back to business as usual. And when we see reports of firms once again engaging in risky bets to reap quick rewards, when we see a return to compensation practices that seem not to reflect what the country has been through, all that looks like business as usual to me. The financial industry has even launched a massive lobbying campaign, locking arms with the opposition party, to stand in the way of reforms to prevent another crisis. That, too, unfortunately, is business as usual. And we're already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair -- that by some twisted logic it is more appropriate for the American people to bear the costs of the bailout, rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.

He closed on an underlying principle: "Ultimately, it is by taking responsibility -- on Wall Street, here in Washington, all the way to Main Street -- that we're going to move past this period of turmoil."

Note: The following text is a quote:

http://www.whitehouse.gov/the-press-office/remarks-president-financial-crisis-responsibility-fee

Home • Briefing Room • Speeches & Remarks

The White House

Office of the Press Secretary

For Immediate Release
January 14, 2010

Remarks by The President on the Financial Crisis Responsibility Fee

Diplomatic Reception Room

11:44 A.M. EST

THE PRESIDENT: Thank you, everybody, for being here. As we all know, our country has endured the deepest recession we’ve faced in generations. And much of the turmoil was caused by irresponsibility on the part of banks and financial institutions. Firms took reckless risks in pursuit of short-term profits and soaring bonuses, triggering a financial crisis that nearly pulled the economy into a second Great Depression.

It was little more than a year ago that we stood on that precipice. Several of the world’s largest financial institutions had already failed. Credit markets froze and banks refused to lend. Trillions of dollars in household savings evaporated as stocks, pensions, and home values plummeted. And we were losing hundreds of thousands of jobs each month. It was at this time that many large financial firms — those left standing — teetered on the brink of collapse, overwhelmed by the consequences of their irresponsible decisions.

Even though these firms were largely facing a crisis of their own making, their failure could have led to an even greater calamity for the country. So the Federal Reserve and other agencies took emergency measures to prevent that outcome. And the previous administration started a program — the Troubled Asset Relief Program, or TARP — to provide these financial institutions with funds to survive the turmoil that they had helped unleash. It was a distasteful but necessary thing to do.

We’ve worked over the last year to manage this program effectively, to hold firms accountable, and to recoup as much tax money as possible. Many originally feared that most of the $700 billion in TARP money would be lost. But because of the management of this program by Secretary Geithner and my economic team, we’ve now recovered the majority of the funds provided to banks.

As far as I’m concerned, however, that’s not good enough. My commitment is to the taxpayer. My commitment is to recover every single dime the American people are owed. And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people — folks who have not been made whole, and who continue to face real hardship in this recession.

We want our money back, and we’re going to get it. And that’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers.

Now, our estimate is that the TARP program will end up costing taxpayers around $117 billion — obviously a lot less than the $700 billion that people had feared, but still a lot of money. The fee will be in place for 10 years, or as long as it takes to raise the full amount necessary to cover all taxpayer losses. This will not be a cost borne by community banks or small financial firms; only the largest firms with more than $50 billion in assets will be affected. And the size of the fee each bank owes will be based on its size and exposure to debt, so that we are recovering tax dollars while promoting reform of the banking practices that contributed to this crisis.

Now, the fact is these financial institutions are essential to our economy. They provide capital and credit to families purchasing homes, students attending college, businesses seeking to start up or expand. And that’s why the rescue program was as necessary as it was unfortunate. And that is why, through this fee and broader reforms that we seek, our goal is not to punish Wall Street firms, but rather to prevent the abuse and excess that nearly caused the collapse of many of these firms and the financial system itself.

We cannot go back to business as usual. And when we see reports of firms once again engaging in risky bets to reap quick rewards, when we see a return to compensation practices that seem not to reflect what the country has been through, all that looks like business as usual to me. The financial industry has even launched a massive lobbying campaign, locking arms with the opposition party, to stand in the way of reforms to prevent another crisis. That, too, unfortunately, is business as usual. And we’re already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair — that by some twisted logic it is more appropriate for the American people to bear the costs of the bailout, rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.

What I’d say to these executives is this: Instead of sending a phalanx of lobbyists to fight this proposal, or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities. And I’d urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill, but by rolling back bonuses for top earners and executives. And more broadly, I am continuing to call on these firms to put greater effort into helping families stay in their homes, to provide small businesses with needed loans, and to embrace — rather than fight — serious financial reform.

Ultimately, it is by taking responsibility — on Wall Street, here in Washington, all the way to Main Street — that we’re going to move past this period of turmoil. That’s how we’re going to avoid the cycles of boom and bust that have caused so much havoc. That’s how we’re going to promote vibrant markets that reward innovation and entrepreneurship and hard work. That’s how we’re going to create sustained growth without the looming threat of another costly crisis. That’s not only in the best interests of the economy as a whole; it’s actually in the interest of these large banks.

So I’m going to be working closely with Congress on this proposal. And on behalf of the American people, I look forward to signing it into law.

Thank you very much.

END
11:50 A.M. EST

Note: The following text is a quote:

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

he White House

Office of the Press Secretary

For Immediate Release January 14, 2010
President Obama Proposes Financial Crisis Responsibility Fee to Recoup Every Last Penny for American Taxpayers

WASHINGTON, DC- President Barack Obama will join his economic team today to propose a Financial Crisis Responsibility Fee to be imposed on the debt of the largest financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street.

“My commitment is to recover every single dime the American people are owed. And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people – who have not been made whole, and who continue to face real hardship in this recession,” said President Barack Obama. “That’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street.”

The fee will be in place at least 10 years, but even longer if needed to pay back every penny of TARP. This will not be a cost borne by community banks or small firms; only the largest firms with more than $50 billion in assets will be affected. In fact, 60% of the revenue will come from the 10 largest financial firms.

Fact Sheet on the Financial Crisis Responsibility Fee: http://www.whitehouse.gov/sites/default/files/financial_responsibility_fee_fact_sheet.pdf

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.

Note; The following text (minus the sample):

http://www.whitehouse.gov/sites/default/files/financial_responsibility_fee_fact_sheet.pdf

Financial Crisis Responsibility Fee

Today, the President announced his intention to propose a Financial Crisis Responsibility Fee that would require the
largest and most highly levered Wall Street firms to pay back taxpayers for the extraordinary assistance provided so
that the TARP program does not add to the deficit. 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.

How the Fee Would Work

While more complete details of the proposed Financial Crisis Responsibility Fee will be released in conjunction with
the President’s budget, the basic outline of the fee is as follows:
Levied on Only the Largest Financial Firms with the Most Leverage

• Applied Only to Firms with More Than $50 Billion in Consolidated Assets: The fee would only be applied to
firms with more than $50 billion in consolidated assets. No small or community bank would be covered by
the fee.

• Fee Would Cover Banks and Thrifts, Insurance and Other Companies That Own Insured Depository
Institutions, and Broker-Dealers: Covered institutions would include firms that were insured depository
institutions, bank holding companies, thrift holding companies, insurance or other companies that owned
insured depository institutions, or securities broker-dealers as of January 14, 2010, or that become one of
these types of firms after January 14, 2010.. These institutions 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.

• Both Domestic Firms and U.S. Subsidiaries of Foreign Firms Subject to the Fee: The fee would cover the
liabilities of all firms in these categories organized in the U.S. – including U.S. subsidiaries of foreign firms.
Operations of U.S. subsidiaries of foreign firms in the areas cited above would be consolidated for the
purposes of the $50 billion threshold and administration of the fee. For those firms headquartered in the
U.S., the fee would cover all liabilities globally. The Administration will also work through the G-20 and the
Financial Stability Board to encourage other major financial centers to adopt comparable approaches.

• Fee Assessed at Approximately 15 Basis Points (0.15 Percent) of Covered Liabilities Per Year

• How Liabilities Subject to the Fee Would Be Determined: Liabilities subject to the fee would be defined as:
Covered Liabilities = Assets - Tier 1 capital - FDIC-assessed deposits (and/or insurance policy reserves, as
appropriate)

• Exempting FDIC-Assessed Deposits and Insurance Policy Reserves As Appropriate: The fee will exempt
FDIC-assessed deposits because they are stable sources of funding covered by deposit insurance and
already subject to assessment. Similarly, the base for the fee would be appropriately reduced based on
insurance policy reserves.

• How the Fee Would Be Assessed: Covered liabilities
would be reported by regulators, but the fee would be
collected by the IRS and revenues would be
contributed to the general fund to reduce the deficit.
The Administration will also work with Congress and
regulatory agencies in order to design protections
against avoidance by covered firms.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.