Obama’s gearing up to sock Wall Street with some sort of tax or fee to pay for future bailouts.
So far, however, he’s being awfully vague about what this fee will apply to. The best description he could offer last night was “far-out” transactions.
What’s a “far-out” transaction? Some people think it’s code for, shhhhhhhh, derivatives.
(A suggestion for the President: Tie the fees to leverage, not particular kinds of transactions. If a future Dick Fuld wants to lever up 30-to-1, fine. Just take a couple billion a month for future wreckage-disposal costs).
Damian Paletta, WSJ: President Barack Obama said for the first time that the government might assess new fees against financial companies engaging in what he labelled “far-out transactions,” in order to protect taxpayers from future bailouts.
Mr. Obama on Wednesday compared the possible fees to the assessments that more than 8,000 banks pay the Federal Deposit Insurance Corp. to guarantee deposits. He didn’t describe what sorts of transactions might trigger the fees, though the way he described it suggests the proposal could cover exotic instruments such as credit derivatives that some believe played a key role in escalating the financial crisis. He also indicated that the fees might be levied against transactions the government wants to discourage.
“So if you guys want to do them, then you got to put something into the kitty to make sure that if you screw up, it’s not taxpayer dollars that have to pay for it,” Mr. Obama said in response to a question at a press conference. “It’s dollars coming out of your profits.”
Administration officials declined to elaborate on Mr. Obama’s remarks regarding the fees. It is unclear if there is a concrete proposal pending, or what the details would be.
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