When President Obama releases his FY 2011 budget proposal next month, included will be a mechanism to ensure the losses associated with the recent financial and auto industry bailout are recouped.
The Administration is refusing to confirm or deny rumors regarding specific provisions of a recoup plan, though it is being reported that at least a portion of bailout funds will be recovered via a new fee on major financial institutions. Consideration of such a fee comes at a time when the President and his advisors must deal with public outcry over large banks’ positive earnings and executive bonuses while the nation’s unemployment rate remains at 10 percent.
Though most large financial institutions have repaid the Troubled Asset Relief Program (TARP) funds they received, the financial bailout law gives Congress the ability to recoup any funds lost through the program. Such costs include those attributed to the bailout of the auto industry and American International Group Inc. (AIG), and the fact that both entities are still struggling makes them unlikely targets of new federal fees.
That leaves large financial institutions, though any such fee will likely be met with fierce resistance from the industry, members of which are already expressing the concern that new fees would inevitably be passed along to consumers and would decrease banks’ ability to lend.