March 4, 2010
Today CBO responded to Senator Grassleys questions about the Presidents proposal for a Financial Crisis Responsibility Fee. The President proposes to assess an annual fee on liabilities of banks, thrifts, and security dealers, as well as U.S. holding companies controlling such entities. The fee, which would apply to firms with consolidated assets of more than $50 billion, would be approximately 0.15 percent of a firms total liabilitiesexcluding federally insured deposits and certain liabilities related to insurance policies.
Preliminary estimates by the staff of the Joint Committee on Taxation identified approximately 60 bank holding and insurance companies with assets in excess of the $50 billion threshold, which include most of the institutions that are likely to pay the fee. For the most part, the firms paying the fee would not be those that are directly responsible for losses realized by the Troubled Asset Relief Program. However, all of the institutions that might be covered by the fee benefited to varying degrees from the programs contribution toward stabilizing the nations financial system and overall economy. The cost of the proposed fee would ultimately be borne to varying degrees by an institutions customers, employees, and investors, but the precise incidence among those groups is uncertain. In general, the effects of a 0.15 percent fee on the economy specifically on the growth rate of gross domestic product, the availability of credit, the stability of financial institutions, and future government outlays to cover losses on those institutionswould probably be small because the fee represents a small fraction of the cost to financial institutions of providing credit to their customers.