Kyle Bell

In the fall of 2008, the financial system collapsed in a way that forced the federal government to bailout major banks on Wall Street. The program, started under the Bush administration, was known as TARP. Congress authorized the Treasury Department to spend $700 billion of taxpayer money to stabilize the system in the hope that banks would continue to lend to businesses and consumers in need of credit.

The banks instead used the money to buy their competitors. Bank of America, which received bailout funds, purchased Merrill Lynch for $50 billion. They also provided extravagant bonuses to their CEOs and other executives at a time when their companies were on the verge of collapse. As the New York Times reports, “Citigroup’s overall 2009 bonus pool is expected to be about $5.3 billion, about the same as it was for 2008, although the bank has far fewer employees.”

Wall Street simply does not get it. The American people saved the financial system from ruin. Our return is tightened credit policies, high unemployment and bank fees that promise to continue to rise. Without the American taxpayer, many of these institutions would no longer exist. Perhaps that would have been for the better as they are resisting attempts by the Obama administration to prevent a repeat of the 2008 meltdown.

Thankfully, President Obama does get it. He is proposing to Congress a 0.15 percent tax on the liabilities of large financial institutions. “It would apply only to those companies with assets of more than $50 billion — a group estimated at about 50…. The administration expects that 60 percent of the revenue would come from the 10 largest firms. As proposed, the fee would go into effect June 30, 2010, and last at least 10 years,” the AP reports. It is estimated that this tax could result in $100-$150 billion to the Treasury. The rest of the TARP money has already been paid back.

“We are already hearing a hue and cry from Wall Street, suggesting that this proposed fee is not only unwelcome but unfair, that by some twisted logic, it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses,” President Obama said. “What I’d say to these executives is this: Instead of setting a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I’d suggest you might want to consider simply meeting your responsibility.”

This is great news. It means that, if Congress passes it, the taxpayer will recover all of the money that we spent to bailout these reckless companies. It also sends a signal to Wall Street that the Obama administration will play hardball with firms that somehow expect to profit off of the generosity of the American people. Passing this proposed tax will recover all of the money that was lent to the banks at the height of the meltdown. This act should only be a first step, though. We still badly need financial reform to ensure that this never happens again.

*Update*

President Obama brought up the new proposed tax on the banks in his Weekly Address. Watch below: