Financial Crisis Responsibility Fee: Issues for Policymakers
Conducted by Hal S. Scott
Nomura Professor of International Financial Systems
Harvard Law School
On January 14, 2010, the Obama Administration announced its proposal for a Financial Crisis Responsibility Fee – the bank tax. In principle, the tax would be imposed on certain financial institutions with $50 billion or more in consolidated assets, and was originally designed to recover the funds paid out under the Troubled Asset Relief Program (TARP). The Administration added an additional objective stating that the fee would also be used to rein in leverage and risk in the financial system. The proposed tax is linked to a provision in the Emergency Economic Stabilization Act of 2008 (EESA) that requires the president to submit a legislative proposal by October 2013 to ensure that TARP does not add to the deficit or national debt.
The Obama Administration’s decision to seek recovery of the TARP funds more than three years before the legislative deadline and to amend the stated objective of the tax raises a number of issues for policymakers as they consider whether to support imposing the tax.