Back in June of last year, we started receiving reports that big banks were beginning to pay back Troubled Asset Relief Program (TARP) funds to the tune of billions of dollars. It was reported that 10 of the largest banks had already repaid upwards of $68 billion, with an additional 22 smaller banks also paying back a portion of the TARP funds they’ve received. The following is a breakdown of the largest banks that claim they have paid back a portion of the funds in various amounts:

JPMorgan Chase & Co. repaid $25 billion

Goldman Sachs Group, Inc. repaid $10 billion

Morgan Stanley repaid $10 billion

U.S. Bancorp repaid $6.6 billion

Capital One Financial Corp. repaid $3.6 billion

American Express Co. repaid $3.4 billion

BB&T Corp. repaid $3.1 billion

Bank of New York Mellon Corp. repaid $3 billion

State Street Corp. repaid $2 billion

Northern Trust Corp. repaid $1.57 billion

Although any money returned is a good start, we must remember that the amount of money laid out in the first place was $700 billion dollars, so $68 billion constitutes a mere 10% payback so far. Couple the banks’ slow-to-payback attitude with another round of in-the-taxpayers’-face bonuses again being paid to top executives of the banks, and you get a recipe for one angry President.

In fact, on January 14, 2010, President Obama unveiled a proposed $90 billion tax on the nation’s largest banks in an effort to force payback of some of those TARP funds. The proposal, called the “Financial Crisis Responsibility Fee,” would place a 10-year tax assessment on bank liabilities on banks such as Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo. Each of the banks could be looking at at least a $1 billion plus tax bill,  maybe more.

The tax, if approved, would make about 50 banks, insurance companies and larger broker-dealers repay a combined total of $90 over the next 10 years. The proposed 0.15% tax would be imposed on a company’s liabilities and affect those companies that received taxpayer bailout money. The auto industry company bailouts would not be included in this tax.

Discussion over this proposal has ranged from outright anger from the banking sector, while others are not even worried that the measure will pass since President Obama’s previous pledge to get AIG to repay large bonuses paid to their executives after receiving taxpayer bailout money has never come to fruition. In addition some analysts say that if the fee is tax-deductible, then it’s not much of an issue anyway.

It will be interesting to see where this one goes because we all know that if the banks are made to pay out a tax on money they received, they’ll do everything in their power to see that the costs associated with the tax will be passed on to their customers.

Sources:
Reuters “Big banks repay government bailout funds” Elinor Comlay and Steve Eder, 6/17/09
WSJ “Obama Unveils $90 Billion Bank Tax With Sharp Words” Jonathan Weisman and David Enrich, 1/15/10