Posted on Tuesday, February 2, 2010
The president’s budget plans would impose a levy on all financial institutions with more than $50 billion in assets. The administration has calculated that fees taken from these banks would yield $9 billion a year over the next 10 years, and up to $117 billion within 12 years if necessary to ensure the full amount of Troubled Asset Relief Program (TARP) funds are recovered.
If approved by Congress, the levy would go into effect on June 30, 2010. The annual tax would be equal to 0.15 percent of a company’s liabilities, excluding insured deposits and Tier 1 capital reserves.
Treasury Secretary Timothy Geithner issued his own statement highlighting certain aspects of the president’s budget related to the government’s controversial financial bailout programs. Geithner noted that because of improved financial conditions, the projected cost of TARP has fallen from $341 billion to $117 billion, as reflected in the 2011 budget (and the figure on which Obama is basing his financial responsibility tax). The Treasury secretary also said that the additional $250 billion reserve that had been set aside in case the economy slipped and additional stabilization efforts were necessary has been removed.
According to Geithner, the Treasury is already taking steps to shift the focus of TARP to housing and small business. Going forward, he says the program will focus on the challenges of helping families avoid foreclosure and bringing down the high unemployment rate.
Other housing-related line items in the budget included a proposal to reduce itemized deductions, including the deduction of mortgage interest, for taxpayers reporting income above $250,000 for a couple or $200,000 for single filings.
The budget also incorporates a request by the Federal Housing Administration (FHA) for congressional approval to raise its annual mortgage insurance premiums by 75 basis points – a move expected to help the agency replenish its depleted capital reserve fund. In addition it provides for an extra $18 million for FHA to implement new risk management procedures, $20 million to combat predatory lending and mortgage fraud at HUD, and additional funding for housing and foreclosure counseling.
One thing the president’s budget did not include, although it was widely expected, was a blueprint – or at least an inkling of an indication – as to the administration’s future plans for the government-backed mortgage financiers GSEs.