January 15th, 2010
Obama proposes TARP fee for banks, not automakers
President Barack Obama announced his intent to charge the largest banks a fee to recoup bailout money. While the U.S. provided $65 billion to automakers under George W. Bush and Barack Obama, a good deal of which resulted in ownership stakes, it will not be charging automakers.
Some analysts critiqued the deal, claiming banks would be paying for the auto bailout and that banks would simply pass along the costs to customers, as they do with massive CEO bonuses. Other observers noted that many customers could move on to other banks, helping to decentralize the industry and reduce the risk that a single large, irresponsible bank could destabilize the economy.
While the government expects bankruptcy loans to be paid back, and expects a profit from its stakes in GM and Chrysler, the $20 billion approved under George W. Bush went to companies which remain in bankruptcy and are unlikely to pay most of it back.
GMAC may be liable for the fee, which will apply to companies with over $50 billion in assets and is intended to raise $90 billion over the course of ten years. Fannie Mae and Freddie Mac are exempt.
Most of the money spent in TARP went to the finance industry, whose representatives have been protesting the fees. The industry continued to pay its executives tens of millions of dollars in bonuses even after taking government aid, and some analysts believe that banks which paid their loans early did so to allow for higher executive pay and bonus packages, though it reduced their ability to lend money.
Bank of America had net profits of $6.5 billion for the first three quarters of 2009, and paid back its $45 billion government loan. In 2008, Bank of America paid $3.3 billion in bonuses, or $13,580 per employee, according to the Wall Street Journal; it expects to pay higher bonuses for 2009.
LINK:
Obama proposes TARP fee for banks, not automakers | Allpar Chrysler, Dodge, and Jeep News
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