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Obama to outline $90bn bank tax Obama outlines $117bn bank levy
(about 4 hours later)
President Barack Obama is expected to announce plans for a new tax to be levied on bailed-out US banks later. President Barack Obama has said Wall Street must repay $117bn (£72bn) to taxpayers and criticised banks for "massive profits and obscene bonuses".
The fee is designed to recoup $90bn (£55bn) that US taxpayers are expected to lose from bailing out the banks during the financial crisis. The tax is to recoup money US taxpayers are expected to lose from bailing out the banks during the financial crisis.
It comes ahead of the latest reporting season on Wall Street, with banks expected to report record bonuses. "My commitment is to recover every single dime the American people are owed," the president said.
The tax, described by officials as a "financial crisis responsibility fee", would be imposed over 10 years. The move follows populist anger at banks, seen as being responsible for causing the recent economic crisis.
However, it is not yet clear how the fee will be levied. Average American
Retrospective action "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," the president said.
Reports suggest that Mr Obama will charge banks based on their assets or profits, rather than targeting bankers' bonuses specifically as in the UK and France. He said the aim was not to punish Wall Street firms but to stop abuses and excesses from happening again.
There is a neat logic to the Obama approach Robert Peston, BBC business editor class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/01/obamas_bigger_rod_for_banks.html">Peston: Obama bashing the banks It's one more thing dragging on the sector, but it's spread over 10 years, so it's not so consequential. It's petty theft from bank balance sheets Robert Albertson, chief strategist at Sandler O'Neill
The BBC's business editor Robert Peston suggests that banks could be charged depending on their reliance on wholesale finance - money provided by other banks and financial institutions. The BBC's Michelle Fleury said the president had made clear "in strong language" that the banks must repay the taxpayer, through what is being dubbed a "financial crisis responsibility fee".
The tax would amount to a retrospective bill for some of the taxpayer assistance received by these banks. "It may go some way to quelling the anger of the average American," our correspondent said.
Officials have been quoted as saying that the move will apply to financial firms with at least $50bn in assets. The tax would apply only to financial firms with assets of more than $50bn.
About 50 such firms operate in the US. Some 35 of them are US-based and about 15 are US subsidiaries of foreign companies. There are reckoned to be about 50 of these institutions - although many did not accept any taxpayer assistance and many others have already paid back what the government lent to them.
"I would therefore expect the US arms of Barclays, Royal Bank of Scotland and UBS to be caught by the tax," says our business editor. 'Drag on sector'
The US government spent more than $250bn bailing out the country's banks during the financial crisis through its Troubled Asset Relief Programme (Tarp), but much of this money has since been refunded. Analysts said the fact that the fees levied on banks would be spread out over a decade would diminish their impact.
"It throws some sand into the gears," said Robert Albertson, chief strategist at Sandler O'Neill in New York.
"It's one more thing dragging on the sector, but it's spread over 10 years, so it's not so consequential. It's petty theft from bank balance sheets."
The levy comes ahead of the latest reporting season on Wall Street, with banks expected to report record bonuses.
The tax will claw back some of the losses from a $700bn taxpayer bail-out of American banks known as the Troubled Asset Relief Program (Tarp).
It was drawn up in the midst of the financial crisis in 2008, following the collapse of US investment bank Lehman Brothers and multi-billion dollar rescue of insurance giant American International Group (AIG).
It helped stem the crisis by injecting public capital into the biggest US banks and restoring confidence in the banking system.