Obama Tells "Fat Cat" Bankers To Pay Up! Proposes Fees

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Obama Proposes Bank Fee, Slams Wall Street


Today President Barack Obama oproposed Wall Street banks pay up to $117 billion to reimburse taxpayers for the financial bailout, as he slammed bankers for their "massive profits and obscene bonuses."

Striking a populist tone, Obama called for a fee on the biggest U.S. banks to "recover every single dime" the government spent rescuing the financial sector from its worst crisis since the Great Depression.

"My determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people," Obama told reporters at a White House event.

Obama and his Democratic allies in Congress are seizing on the chance to cast Wall Street as its political foil in a congressional election year when their party is worried Republicans might weaken its majority status.

Obama, who has labeled financial executives "fat cats" for the huge bonuses they have received, is taking an increasingly tougher line against the industry.

Democrats hope that will resonate with an American public furious at multimillion-dollar bonuses being handed out by banks as the middle-class struggles with double-digit unemployment.

The fee is also aimed at helping to reduce the ballooning U.S. budget deficit.

Democrats in Congress signaled they would quickly take up the legislation.

Senate Finance Committee Chairman Max Baucus praised Obama for "working to ensure taxpayers see a return on their investment."

"I remain committed to working with the president, and my colleagues across the aisle, to make sure this proposal is right," he said.

But Republicans may try to block it. Some of them have criticized the bank fee as a tax that would be passed on to small businesses and Americans with savings accounts.

Republican Representative Scott Garrett said the bank tax would "further cripple the economy" through its impact on consumers and small firms.

The aim of Obama's proposal is to recoup losses from the $700 billion rescue program of U.S. banks called the Troubled Asset Relief Program, or TARP.

It calls for a levy of 0.15 of a percentage point on the balance sheets of companies with assets exceeding $50 billion.

The Obama administration expects to raise $90 billion over the first 10 years, and thinks this will ultimately cover all losses from TARP, although at the moment these losses are being projected at $117 billion.

Obama has suffered a backlash for supporting the rescue program, which was begun in the Bush administration.

Forged after the collapse of U.S. investment bank Lehman Brothers and multi-billion-dollar rescue of insurance giant American International Group, TARP helped stem the crisis by injecting public capital into the biggest U.S. banks and convincing investors no others would be allowed to fail.

The administration said it was needed to avert a catastrophe in the broader economy, but it did not prevent the country from sliding into a deep recession that has pushed unemployment to a 26-year high of 10 percent.

Wall Street has rebounded, raking in bumper profits. This has helped many of the banks repay their financial bailout funds, freeing them of government rules on compensation and allowing them to pay out major staff bonuses.

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Big financial firms consider the fee unfair because it will apply even to those companies that have already repaid the rescue funds they received as well as to firms that got no bailout money to start with.

But the White House argues that the industry as a whole benefited from the calm the rescue package brought to the markets. Obama also said the financial industry bears responsibility for the crisis because of what he said were its reckless actions that led to the subprime mortgage meltdown.

Financial industry analysts said the fee would act as a drag on the sector, though the fact that the fee will be spread out over 10 years lessens the impact.

"It throws some sand into the gears. It's one more thing dragging on the sector, but it's spread over 10 years, so it's not so consequential. It's petty theft from bank balance sheets," said Robert Albertson, chief strategist at Sandler O'Neill in New York.

Full details of the fee proposal will not be laid out until Obama delivers his budget for fiscal 2011 in early February, and will then be subject to shaping by Congress.

AIG will be subject to the fee, but mortgage lenders Fannie Mae and Freddie Mac, which are under government conservatorship, will be excluded, as will still-ailing U.S. automakers that got bailout money.

The bank fee proposal come as Congress is weighing sweeping financial regulatory reforms in the face of stiff industry opposition.

Obama is pushing such an overhaul, but some liberal supporters of Obama have accused him of coddling Wall Street by not seek a more robust package of Wall Street reforms.

Wall Street chiefs were grilled on Wednesday at the opening hearing of a special inquiry into the 2008 financial crisis and the resulting taxpayer bailout to save their industry.

The heads of Goldman Sachs, Morgan Stanley, JPMorgan Chase and Bank of America faced the first public hearing of the Financial Crisis Inquiry Commission. It will convene throughout the year and is expected to issue a report by December 15.

Obama said the goal of the bank fee is "not to punish Wall Street firms but rather to prevent the abuse and excess that nearly caused the collapse of many of these firms and the financial system itself."

"We cannot go back to business as usual," he said.


Sources: MSNBC, CNBC, Reuters, Whitehouse.gov, The Daily Beast

Obama's "Disappointed Father" Bank CEOs Meeting

Banks: We'll "Step up now"


Facing White House pressure to increase lending, bank CEOs plan to tell President Barack Obama in a meeting on Monday that they are ready to “step up” and take additional steps to promote economic recovery, industry officials tell POLITICO.

“Every CEO that’s participating is ready to a) listen and b) step up,” said an industry executive familiar with plans for the meeting. “Everybody’s goal is to come out of the meeting with actionable, constructive and measurable things that the industry can do to spur recovery.”

Obama will take a measured tone with the bankers, telling them he wants to have a candid and constructive conversation and doesn’t want to vilify anyone, according to administration officials. But the president will tell the banks that they have a special responsibility to help spur recovery because of the extraordinary bailout assistance they received last year.

The president will acknowledge the industry concern that regulators are overcorrecting and have become overzealous. And he’ll call for a dialogue about the issue.

Still, Obama wants the CEOs to send a signal to loan officers that they’ll not be rewarded for turning down loans. The president will say that lending is critical to the recovery and that he hears story after story about creditworthy borrowers who haven’t missed a payment but have been cut off.

Lucas van Praag, a Goldman Sachs managing director who is the firm’s global head of corporate communications, said: “Coming into this meeting, we are focused on helping our clients to protect and grow their businesses. Clients are at the heart of our business. And whether it is helping a client restructure debt, raise equity [or] make a strategic acquisition, helping a U.S. aircraft manufacturer to finance the export of American-made planes or underwriting Build America bonds so that municipalities can build schools, roads and hospitals, meeting clients’ needs is the role we play in bringing a broad-based economic recovery closer for all Americans.”

The meeting comes as public anger about the Wall Street bailout — and the federal deficit spending necessary to finance it — is becoming a major political challenge for the Obama administration. At a time when unemployment is at 10 percent, the administration has expressed frustration that the big banks have been slow to lend to the small businesses that can generate job growth.

Major Wall Street players say they are caught between the urging of the White House to lend and the equally forceful guidance from federal regulators not to lend to uncreditworthy borrowers. It was willy-nilly lending to unqualified subprime mortgage customers, after all, that triggered the global economic meltdown. The bankers say they’ve learned their lesson and are trying to avoid a repeat of that fiasco.

Obama has suggested in public comments that the pendulum has swung too far, hurting small firms that can’t get credit to finance growth.

The bankers — including the heads of Goldman Sachs, American Express, JPMorgan, Capital One, Bank of America, Morgan Stanley, Citigroup and Wells Fargo — will not present a specific industry plan. Instead, they’ll talk about their own organizations’ plans, especially to help small businesses, a key White House focus.

The industry executive said that ideas that come out of this meeting could include more lending for small business and an extension of Treasury’s Build America bonds program, a stimulus measure that was designed to lower borrowing costs for state and local governments in getting infrastructure projects moving.

“There’s a very strong understanding that we have to work constructively on financial regulatory reform that will provide markets with certainty,” the executive said. “The industry is perceived as recalcitrant because it has raised issues with particular details of reform. However, as a general matter, all of the firms at the table recognize that reforms are necessary to prevent future crises, reestablish confidence in the system and provide certainty. Markets crave certainty.”

Rob Nichols, president and COO of the Financial Services Forum, said: “We are in agreement with the administration that we need reform and modernization of the U.S financial supervisory framework. We are committed to the important task of creating an efficient and flexible 21st century regulatory architecture that ensures the safety and soundness of financial institutions, and protects the interests of investors, depositors, and customers. A safe, sound, and efficient financial sector is critical to the health of the U.S. economy, our recovery prospects, and job creation.”

The industry executive said the message of the meeting appears to be “half woodshed and half help us move forward.”

The White House said Obama “will meet with members of the financial services industry to discuss our shared interest in economic recovery, the need to increase small-business lending and the administration’s plans for financial regulatory reform."

The president told CBS’s “60 Minutes” in an interview aired Sunday night: “I did not run for office to be helping out a bunch of fat-cat bankers. ... What’s really frustrating me right now is that you’ve got these same banks who benefited from taxpayer assistance who are fighting tooth and nail ... against financial regulatory control.”

The administration official said that in the meeting, Obama is expected to compliment banks that have moved toward more stock-based compensation that’s held for the long term — an indirect reference to Goldman Sachs’s announcement last week that it would convert the bonuses of its top executives from cash to stock.

The president will ask more banks to move in that direction, but there’s little the administration can do to force changes in compensation at the banks. Still, “pay czar” Ken Feinberg announced dramatic pay cuts last week for firms that still have not repaid bailout funds from the Troubled Asset Relief Program.

Feinberg has no legal authority to impose similar measures on banks that the government no longer controls. For them, Obama must use the bully pulpit.

The Goldman spokesman, van Praag, said: “Our compensation principles are founded on the idea that our employees’ interest should be directly aligned with our shareholders’ best interest. Supporting a shareholder vote on executive compensation is a logical extension of the compact we have with our shareholders. The announcement that our most senior executives will receive all their discretionary compensation in equity, which will be ‘at risk’ and which they won’t be able to sell for five years, is a recognition of their responsibilities and the circumstances under which we are operating.”

An administration official said a dozen top executives will attend Monday’s meeting at the White House: Lloyd Blankfein, chairman and CEO of Goldman Sachs; Ken Chenault, president and CEO of American Express; Richard Davis, chairman, president and CEO of US Bancorp; Jamie Dimon, chairman and CEO of JPMorgan Chase; Richard Fairbank, chairman and CEO of Capital One; Bob Kelly, chairman and CEO of Bank of New York Mellon; Ken Lewis, president and CEO of Bank of America; Ron Logue, chairman and CEO of State Street Bank; John Mack, chairman and CEO of Morgan Stanley; Dick Parsons, chairman of Citigroup; Jim Rohr, chairman and CEO of PNC; and John Stumpf, president and CEO of Wells Fargo.

Also attending will be Treasury Secretary Timothy Geithner and three top White House officials: senior adviser Valerie Jarrett; Christina Romer, chairwoman of the Council of Economic Advisers; and National Economic Council Director Lawrence Summers.

In November, Goldman Sachs launched 10,000 Small Businesses, a five-year, $500 million commitment, in development for nearly a year, that was modeled on the Goldman Sachs 10,000 Women Initiative.

Also last month, JPMorgan told Reuters that it was raising its lending to small businesses by $4 billion this year and hiring more than 300 new bankers to cater to these businesses.


Sources: Politico, MSNBC