Large Wall Street bonuses spark talk of new levy on financial industry
Lawmakers hope to avert a public backlash over multimillion-dollar bonuses at a time when the nation suffers with 10% unemployment and the federal government ails from record budget deficits.
By Jim Puzzanghera
Reporting from Washington
As Wall Street prepares to pay rich bonuses once again, Obama administration officials are considering a new tax on the financial industry — a move that could temper resentment over banking’s rapid recovery at a time when more than 15 million Americans remain out of work.
The $700-billion federal bailout approved in late 2008 saved the nation’s major banks from near-certain collapse. Now the White House is considering a fee on financial institutions as one way to help recoup any losses from the bailout fund, according to a senior administration official.
In Congress, meanwhile, some lawmakers are weighing a new tax on bonuses paid to Wall Street traders and executives. Another proposal would impose new fees on stock transactions — a tax that would reap the most from large banks, hedge funds and other institutions with huge trading operations.
Washington’s resolve in finding a way to pull cash from overstuffed Wall Street wallets stems in large part from fear of a public backlash over multimillion-dollar bonuses at a time when Main Street still suffers with 10% unemployment and the federal government ails from record budget deficits.
Reality about the economy differs depending on whether “you talk to somebody that is in line for a huge cash bonus at a Wall Street firm and a small business on Main Street that’s trying to get a loan,” White House Press Secretary Robert Gibbs said.
President Obama, he said, continues to get “visibly angry” when discussing large Wall Street bonuses.
But all the main ideas for new fees or taxes on the industry have potential problems. Among the concerns are that the measures would stunt the anemic economic recovery and that pay restrictions could be circumvented by clever industry tactics, as happened with past government attempts to rein in compensation.
“I fully understand why the public is very, very mad, and it’s appropriate to be mad at the bankers. The problem is the things that would be truly emotionally satisfying are almost always bad policy,” said Douglas Elliott, an economics fellow at the Brookings Institution think tank and a former investment banker.