Not that painful

14 January 2010 By Antony Currie Follow @AntonyMCurrie

Forcing U.S. banks to pony up $90 bln might plug the TARP deficit. But spreading payments over 10 years makes the cost small enough relative to profits even for big payers like JPMorgan and BofA that a few tweaks will cover it. It s a missed opportunity to change behavior.

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President Barack Obama announced a levy on banks to cover losses related to the U.S. Treasury's Troubled Asset Relief Program. Dubbed the Financial Crisis Responsibility Fund, it will charge an annual fee of 15 basis points on total assets, less Tier 1 capital and FDICinsured deposits.

The levy will affect financial firms with $50 billion or more in assets that received government aid though TARP, the Temporary Liquidity Guarantee Program or other emergency programs during the crisis.

My commitment is to recover every single dime the American people are owed. And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people – who have not been made whole, and who continue to face real hardship in this recession, Obama said.

The White House estimates the TARP shortfall at $117 billion but that it could fall to $90 billion in the coming years. It is expected the levy will remain in place for 10 years to recoup $90 billion and may be extended for two more years if the losses are higher.

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