President Obama's proposed fee on the country's biggest banks receiving taxpayer bailout money would ultimately result in costs to the firms' customers, employees, and investors, a non-partisan Congressional watchdog said today.
In January the President unveiled a proposal to impose a fee on about 50 of the nation's biggest banks with assets of $50 billion or more in an effort to recoup around $90 billion of taxpayer money dished out as part of the Wall Street bailout.
"We want our money back and we're going to get it," the President said.
But the Congressional Budget Office today warned that "the ultimate cost of a tax or fee is not necessarily borne by the entity that writes the check to the government."
"The cost of the proposed fee would ultimately be borne to varying degrees by an institution's customers, employees, and investors," the CBO said today in a letter to Sen. Chuck Grassley.
"Customers would probably absorb some of the cost in the form of higher borrowing rates and other charges, although competition from financial institutions not subject to the fee would limit the extent to which the cost could be passed to borrowers. Employees might bear some of the cost by accepting some reduction in their compensation, including income from bonuses, if they did not have better employment opportunities available to them. Investors could bear some of the cost in the form of lower prices of their stock if the fee reduced the institution's future profits."
The availability of credit - already a problem for some consumers and businesses - could also be limited by the proposed fee, the CBO said.
"The fee would probably lower the total supply of credit in the financial system to a slight degree. It would also probably slightly decrease the availability of credit for small businesses."
The effect of the fee on the banks, the CBO said, would be "small". - ABC News Story
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