By Brai Odion-Esene

WASHINGTON (MNI) – The Obama administration Monday repeated its
call for a fee to be assessed on the largest U.S. financial firms in
order to recoup the costs of bailing out the industry during the
financial crisis.

According to the “Greenbook,” released by the Treasury Department
Monday — and intended to explain the revenue proposals in the
President’s FY 2012 budget published earlier — the law that created the
Troubled Asset Relief Program requires the government to “propose an
assessment on the financial sector to pay back the costs of these
extraordinary action.”

The proposal was first put forward last year as part of Obama’s
FY’11 budget and is again included in today’s proposals as part of the
administration’s deficit reduction efforts.

“The structure of this fee would be broadly consistent with the
principles agreed to by G-20 leaders and similar to fees proposed by
other countries,” the Greenbook said.

According to the Treasury, the fee would be based on the covered
liabilities of a financial firm and computed using information filed
with Federal or State regulators.

For insurance companies, certain insurance policy reserves and
other policy obligations also would be deducted in computing covered
liabilities. “In addition, adjustments would be provided to prevent
avoidance,” the Greenbook said.

The rate of the fee applied to the covered liabilities would be
approximately 7.5 basis points, with a discount applying to more stable
sources of funding such as long-term liabilities. The proposal said the
fee would be deductible in calculating corporate income tax.

According to the Greenbook, the fee would be assessed on the
liabilities of the largest firms in the financial sector. It would apply
to U.S.-based bank holding companies, certain broker-dealers, companies
that control certain broker-dealers and insured depository institutions.

In addition, U.S. firms that own and control these type of entities
as of January 14, 2010 would also be subject to the fee. Foreign firms
with U.S. subsidiaries that fall into the above categories, and have
assets in excess of $50 billion, would also be covered by the fee.

Those exempt include firms whose worldwide consolidated assets
amount to less than $50 billion — for the period when their assets are
below this threshold.

The fee would be effective as of the day after December 31, 2012.

The Greenbook also noted that the President’s FY’12 budget
proposals also updates a previous request to eliminate the carried
interest loophole for hedge fund managers and other professional
investors.

The proposal specifically seeks to address investment partnerships,
it said, that allow “highly compensated” service providers to be taxed
on their services income at capital gains rates.

According to the Treasury, these rates are lower than tax rates
most moderate-income Americans pay on their earnings.

“Closing this loophole would raise $15 billion over the next 10
years,” the Treasury said.

** Market News International Washington Bureau: (202) 371-2121 **

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