MercoPress. South Atlantic News Agency

Obama Administration Pushes for Fee on Large Banks to Pay for Bailouts

US Secretary of the Treasury addressing the Senate Finance Committee

United States big banks should be charged a fee to pay for bailouts as it will make them less prone to reckless lending, US Treasury Secretary Timothy Geithner told lawmakers as he sought support for the proposal.

The fee would be levied over 10 years and set at a level to fully recover costs of the government's Troubled Asset Relief Program (TARP) put in place to stabilize the banking system at the height of the financial crisis. Funds would be used to pay down the swelling United States deficit. The fee would not be a substitute for tougher capital standards included in a push by President Barack Obama for the biggest banking overhaul since the Great Depression.

“The fee is designed to complement efforts to improve the stability of our financial system by providing modest incentives against funding riskier activities with less stable funding,” he told the Senate Finance Committee.

US Secretary of the Treasury Timothy Geithner ran into sceptical questioning but not outright opposition to taxing banks, which are among the least popular industry groups among lawmakers.

The move to recoup bailout funds accompanies opinion polls showing voters concerned about exploding federal budget deficits after emergency spending to counter the effects of the recession. Geithner said the fee would restrain banks' risk-taking by making it more costly for them to take on big bets without having the assets to back them up.