WASHINGTON President Barack Obama will announce plans on Thursday to raise up to $120 billion from major U.S. financial firms to cover expected losses from a taxpayer-funded bank bailout, a senior administration official said on Tuesday.
Obama's announcement will come as U.S. unemployment is stuck in double digits and public anger is growing over big bonuses that some financial firms are poised to resume paying, barely a year after the height of the global financial crisis that made the bailout necessary.
The Obama administration official said the amount of money raised from the fees would not exceed $120 billion since this was the higher end of conservative estimates of the cost of the Troubled Asset Relief Program, or TARP.
U.S. Treasury officials expect TARP losses to be much lower than that sum, and over the course of years the fee will pay back any costs of the $700 billion taxpayer bailout, the administration official said.
TARP was created by President George W. Bush's administration to shore up the financial system during the financial meltdown, which plunged the United States into the worst recession in 70 years and has pushed unemployment to 10 percent.
The proposal of a TARP fee has been under discussion since August and Obama felt it was important to find ways to make sure taxpayers got all the money back sooner than was required under the law, the administration official said.
A number of big U.S. banks have already repaid the capital they received under TARP. The legislation that created TARP calls for taxpayer losses to be recouped by 2013.
A financial industry source in Washington told Reuters that many options on how to structure such a fee were being discussed, including basing it on the amount of a financial firm's liabilities.
The source, speaking anonymously because the fee has not officially been proposed, said government officials are also discussing exempting automakers and insurer American International Group from the fee, even though these companies are expected to represent a large chunk of the bailout losses.
(Additional reporting by Karey Wutkowski; editing by Chris Wilson)