Financial Regulatory Forum

US’ Geithner says bank fee can recoup AIG bonuses

By David Lawder

WASHINGTON, Feb 3 (Reuters) – U.S. Treasury Secretary Timothy Geithner on Wednesday said insurer AIG’s contracts to pay hundreds of millions of dollars in bonuses were “outrageous” and appealed to Congress to help recoup the payments.

Geithner said Congress could help recover the “deeply irresponsible” bonuses by passing an Obama administration proposal to levy fees on large financial firms.

“Those contracts were outrageous. They should never have been permitted,” Geithner said in testimony to the U.S. House of Representatives Ways and Means Committee.

Obama has proposed a fee on the largest financial companies to collect around $90 billion over 10 years to recoup taxpayer losses resulting from financial bailouts.

The White House has shifted to a more aggressive stance on Wall Street since the Democrats lost a Senate seat in a special election in Massachusetts in January. The election highlighted voter resentment against big banks and big bonuses in the wake of massive bailouts during the financial crisis.

BREAKINGVIEWS – Copying U.S. bank tax will be tempting, but hard

By Peter Thal Larsen

LONDON, Jan 15 (Reuters Breakingviews) – Tim Geithner has changed his tune. Just two months ago, the U.S. Treasury Secretary dismissed Gordon Brown’s call for a global financial tax as “not something we would be prepared to support”. But now the United States has unveiled its plan to tax bank liabilities, Geithner is keen for others to do the same. He may be disappointed.

Other governments are bound to be tempted. The U.S. levy, designed to raise at least $90 billion over ten years, provides valuable tax revenue. It allows President Obama to demonstrate that he is being tough on banks just as they prepare to pay out large bonuses. And by penalising big banks that rely on wholesale funding, it imposes an explicit charge on those institutions that are deemed too big to fail.

But the United States is one of a very small group of countries that could impose such a tax on its own. It has a large domestic banking industry, and is home to many of the world’s major financial institutions. Only China and, perhaps Japan, are in the same category.

White House mulls bank fee in budget -reports

WASHINGTON, Jan 11 (Reuters) – The Obama administration is considering imposing a fee on banks to help recover some of taxpayers’ costs of bailing banks out from the financial crisis, according to multiple reports on Monday.

The White House said President Barack Obama wants to ensure that taxpayers are paid in full. “That’s the president’s goal,” White House spokesman Robert Gibbs told reporters. He declined to provide details on how that might be done.

Politico, the Wall Street Journal and New York Times, in nearly identical stories on their websites, cited administration officials saying that a bank fee was under consideration and might be included in the president’s budget proposal next month.