Looking to recoup taxpayer money used to bailout financial institutions, the Obama administration is proposing a “responsibility fee” on large financial institutions, possibly including insurers. Levied on the debts of financial firms with over $50 billion in consolidated assets, the fee is intended to deter financial companies from overleveraging themselves.
“My commitment is to recover every single dime the American people are owed. And 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,” President Obama said in a statement. “That’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street.”
The fact sheet issued with the president’s statement did not define “financial firms.” According to the Insurance Information Institute’s 2009 Financial Services Fact Book, 12 life and health insurers, and 11 property/casualty insurers currently have assets over $50 billion. Since the inception of financial crisis, insurers have strove to emphasize the differences between the risk profiles of banks and insurance and have been largely successful. Noting that only two insurance companies needed relief under the Treasury Department’s Troubled Asset Relief Program (TARP), the insurance industry was successful in convincing Congress to exclude them from legislation aimed at thwarting systemic risk.
The proposed fee is expected to be inserted into the administration’s budget proposal for fiscal 2011 in February.
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