Obama eyes bank fee for bonus season

President Barack Obama is moving to impose a new fee on banks to help pay down the federal deficit.

The administration did not spell out specifics of the fee Monday, but it would come as major parts of the financial industry return to profitability.

{mosads}The government committed trillions of dollars in bailout money in 2008 and 2009 as the economy fell into a financial crisis.

Wall Street stock values have soared since then, and banks are preparing this month to pay out lavish bonuses. Meanwhile, the gulf between Wall Street and Main Street poses a political headache for Democrats as they head into what polls suggest will be a brutal campaign season for their party.

The economy lost 85,000 jobs in December and the national unemployment rate rests at 10 percent. The bailout efforts, unemployment rate and post-war record deficit all weigh heavily on Democrats.

Although the bailouts began under former President George W. Bush’s administration, Republicans criticize Democrats for playing too large a role in the private sector and for perpetuating a culture of government bailouts.

The new fee, to be included in the president’s budget in February, would represent a way to recoup money from the financial industry now that it is returning to health.

“The president has talked on a number of occasions about ensuring that the money that taxpayers put up to rescue our financial system is paid back in full. That’s been the president’s position,” White House press secretary Robert Gibbs said. “I think that’s the least that taxpayers are owed.”

Obama and congressional Democrats have also come under criticism from liberal groups for being too tight with Wall Street. AFL-CIO President Richard Trumka on Monday warned the White House it could see a repeat of the 1994 elections, when Democrats lost control of Congress, if it does not embrace more liberal economic policies.

{mosads}Other governments, most notably Great Britain’s, have announced taxes intended to punish banks for rewarding employees with huge bonuses. Calls for a financial transaction tax also have been raised by some congressional Democrats, but have been resisted by the administration.

Major Wall Street banks have already repaid their aid under the $700 billion bailout program, known as the Troubled Asset Relief Program (TARP). Banks have repaid a total of more than $120 billion from the government’s program to purchase capital.

The government has also received more than $4 billion in warrants that were part of the original bailout program.

The thorniest aspects of the TARP program remain the billions of dollars in support of American International Group (AIG), General Motors and Chrysler. The Obama administration also committed $75 billion in TARP money to support the broader housing market.

Gibbs and other senior administration officials did not disclose which firms or parts of the industry would be subject to the new fee.

Under the law that created the TARP program, the president is required after five years to submit a plan to Congress for recouping any shortfall in the money.

“The TARP law contemplates recoupment, but it also isn’t triggered for another four years,” said Scott Talbott, senior vice president at the Financial Services Roundtable. “A tax on the industry will hinder recovery efforts. At the same time, we’re awaiting the details.”