Obama Slaps Politically-Charged 'TARP Tax' On Banks

President Barack Obama said "we want our money back" and has proposed the Financial Crisis responsibility fee on the nation's largest financial firms to make sure that U.S. taxpayers are fully compensated for the assistance that they provided to Wall Street.

Obama referred to the bonuses that banks are paying to top employees "obscene" and has proposed the new tax to help recoup the $117 billion projected shortfall from the bailout funds given to firms that were collapsing at the height of the recession.

Obama said that he is determined to recover every dime of the $700 billion from the Troubled Asset Relief Program. Congress will have to sign off for the tax to go into effect.

"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 administration is expected to receive 60 percent of the revenue from this tax from the 10 largest firms involved in the TARP.

If passed by Congress, the proposed fee would go into effect on June 30, 2010, and is scheduled to endure for at least 10 years.

At a meeting on Capitol Hill, the heads of the biggest Wall Street firms did not hide their disapproval of the proposed tax.

"Politics have overtaken the economics," said Scott Talbott, the chief lobbyist for a group representing large Wall Street institutions. "This is a punitive tax on companies that repaid TARP in full or never took TARP."

J.P. Morgan Chase & Co. CEO, Jamie Dimon said that "using tax policy to punish people is a bad idea. I mean, at one point you have to be a little fair."

Republican political minds spoke out at the idea that the tax would be a stimulus towards bank lending.

"To think that banks will loan more money if you tax them is beyond economic ignorance," Republican Representative from Texas, Jeb Hensarling said.

Many are worried that the large banks will pass the tax along to consumers, or in other words the same taxpayers President Obama has promised will be repaid.

Banks that will likely pay most of the tax include Bank of America (NYSE: BAC), Goldman Sachs (NYSE: GS), J.P. Morgan Chase (NYSE: JPM), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C).

Analysts at FBR Capital said while the "TARP Tax" makes great headlines it is unlikely to pass the Senate. The firm stated, "Our sources on Capitol Hill indicate that the TARP tax has a very low probability of passage in the Senate, as nearly all Republicans and a sufficient number of Democrats would likely vote against the measure." The firm thinks the tax would likely pass the more populist-driven House.

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