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Banking industry

Obama Announces $1bn Annual Levy on Large Financial Institutions

Strategic Insights

— 1 min read

The US president, Barack Obama, has announced a 10-year "financial crisis responsibility fee" aimed at recouping the $117bn loss to the US treasury from the $700bn bailout, known as the troubled assets relief programme (TARP). The levy, which will be 15 basis points, or 0.15%, on the liabilities of 50 large financial institutions with assets of more than $50bn, is expected to raise over $1bn annually. This move comes as US banks, including HSBC, Barclays, and Royal Bank of Scotland, face massive profits and obscene bonuses, prompting Obama to demand that they reduce their staff bonus payments.

Key Takeaways:

  • The $1bn annual levy is expected to be imposed on 50 large financial institutions with assets of more than $50bn.
  • HSBC, Barclays, and Royal Bank of Scotland combined could face an annual bill of more than $1bn.
  • The levy is aimed at recovering the $117bn loss to the US treasury from the $700bn bailout, known as TARP.
  • The US administration estimates that the levy will be enough to cover losses on TARP over the next 10 to 12 years.
  • Obama has made it clear that he is not prepared to negotiate the levy and has demanded that banks reduce their staff bonus payments.
  • The move follows the decision by Alistair Darling to slap a one-off 50% tax on bankers' bonuses over £25,000.

Statistics:

  • The $117bn loss to the US treasury from the $700bn bailout, known as TARP.
  • The $1bn annual levy expected to be imposed on large financial institutions.
  • 50 large financial institutions with assets of more than $50bn are expected to be subject to the levy.
  • The US administration estimates that the levy will recoup $90bn of the $117bn lost on TARP.
  • JP Morgan has already incurred a bonus and salary bill of $8.6bn for investment banking in the first nine months of the year.

Sources:

  • Barack Obama's speech on the "financial crisis responsibility fee"
  • Morgan Stanley's analysis of the potential impact of the levy on UK banks
  • Alistair Darling's announcement of a one-off 50% tax on bankers' bonuses over £25,000
  • Forbes.com's article on the TARP program.

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