Financial Crisis Responsibility Fee

What Was the Financial Crisis Responsibility Fee?

The Financial Crisis Responsibility Fee was a proposed federal tax put forward by President Barack Obama in 2010. The tax would have been forced on financial firms that received money from the Troubled Asset Relief Program (TARP) for the government to recover each dollar spent on bailing out companies during the 2008 financial crisis. The fee, be that as it may, was rarely enacted.

Understanding the Financial Crisis Responsibility Fee

The Financial Crisis Responsibility Fee was part of President Obama's budget proposal in 2010. It was planned as a method for recuperating the government's investment in the financial system bailout. Under this proposed tax, the government would have taxed the biggest financial firms that were viewed as at the root of the 2007-2008 financial crisis.

The proposed tax would have been required on around 50 banks that each had $50 at least billion in consolidated assets, and would have charged them $9 billion every year for something like 10 years. The fee would have applied both to domestic firms and U.S. subsidiaries of foreign firms. It was estimated that 60% of tax revenues would be paid by the 10 biggest financial institutions.

As per the proposed tax, whenever executed, the government would have collected the tax until the United States recuperated the costs from stabilizing Wall Street during the financial crisis through TARP. At the point when President Obama proposed the Financial Crisis Responsibility Fee in January 2010, the government estimated that TARP would, by conservative evaluations, cost $117 billion.

The goal was to keep taxpayers from being required to bail out Wall Street firms and to try not to become the government's deficit. The money created from the tax would be collected by the Internal Revenue Service (IRS) and afterward allocated to the government's budget deficit.

Not set in stone to see this regulation pass, particularly in what he saw as the proceeded with excess wealth of those responsible for causing the financial crisis when contrasted with the average American taxpayer, whose tax dollars were utilized to bail out the financial institutions responsible for the crash. In any case, the proposal at last never passed into law.

The Troubled Asset Relief Program (TARP)

TARP, which was endorsed into law in October 2008 as part of the [Emergency Economic Stabilization Act](/emergency-economic-strength act), was a response to the global financial crisis.

TARP was a group of programs made and run by the U.S. Treasury Department that were planned to balance out the country's financial system, reestablish economic growth, and address the subprime mortgage crisis.

The government did this by buying troubled companies' assets and equity. TARP initially authorized the government to spend $700 billion to buy illiquid mortgage-backed securities (MBS) and different assets from key institutions. Be that as it may, The [Dodd-Frank Wall Street Reform and Consumer Protection Act](/dodd-frank-financial-administrative reform-bill), which was passed in 2010, diminished this authorization to $475 billion.

Under TARP, the government bought stocks in Bank of America/Merrill Lynch, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, State Street, and Wells Fargo.

As per the rules of TARP, the companies engaged with the program lost certain tax benefits. It additionally didn't permit beneficiaries to give bonuses to their most generously compensated executives and in certain occurrences, putting limits on compensation for executives.

Under TARP, the government burned through $245 billion to settle banks, $80 billion on the U.S. car industry, $68 billion on stabilizing AIG, $31 billion on different expenditures, and $19 billion on purchasing toxic assets. The Freddie and Fannie bailout didn't fall under TARP.

Features

• The Financial Crisis Responsibility Fee was a proposed tax legislation put forward by President Obama in 2010 to recover the money spent on bailing out Wall Street firms during the 2008 financial crisis.
• Certain companies were to be taxed consistently for something like 10 years or more until the TARP bill was paid back in full.
• The goal was to forestall having taxpayers pay for the bailout and to keep away from an increase in the government's deficit; notwithstanding, the tax was rarely enacted.
• The money used to bail out financial firms was distributed under the Troubled Asset Relief Program (TARP) in the amount of $117 billion.