WASHINGTON (CN) – The government may impose a tax on big banks to recover bailout funds, the inspector general for the Troubled Asset Relief Program told the Senate finance committee Tuesday.
In his quarterly report to Congress, TARP overseer Neil Barofsky said that Bank of America had repaid its TARP funds in full and Citigroup is close behind.
But although many banks are repaying bailout funds, taxpayers will still lose an estimated $127 billion from government payouts through the program, according to the Office of Management and Budget.
“We need to think about how to get that money back on behalf of taxpayers,” committee chair Max Baucus, D-Mt., said.
“As the economy improves, we certainly hope to see these losses decrease,” Barofsky said.
Part of this loss is due to the design of TARP, which was formed in 2008 by President Bush and Congress to help the government directly purchase securities. It has since morphed into 13 programs that are less based on assets. A huge chunk of TARP assistance went to the auto industry and homeowners — investments that cannot easily be recouped, Barofsky said.
Barofsky said the housing program will ultimately be “an entire loss” because there is no mechanism for recovery. And the auto industry’s ability to pay back government investment will depend on the health of the economy.
“Though it is meeting its goal for Wall Street, it is not meeting its goal of getting Main Street back on its feet,” Barofsky said in the hearing. TARP’s housing program was created to help homeowners save their homes, but it is “not even close” to attaining that goal, Barofsky said, adding that there are more foreclosures this year than last.
To help recoup these losses, President Obama proposed a tax on big banks that received TARP funds. The proposed Financial Crisis Fee will offset the taxpayer losses due to bailouts and would only apply to companies with more than $50 billion in assets.
The proposal may make its way into the financial reform bill now being debated in the Senate.