Obama Proposes New Tax on Major Banks

U.S. President Barack Obama plans to announce a proposal for a new tax on the largest financial companies in the U.S. on Thursday, aiming to recover some of the taxpayer money used to support these companies during the economic crisis.

By proposing a multi-year tax on large banks, Obama targets an industry whose political deafness has upset his administration. Banks, once hit by the collapse of Wall Street, are now again recording profits and proposing massive bonuses for their executives, provoking public outrage. The new tax is expected to generate 120 million kuna in revenue. A senior White House official, who requested anonymity, stated that this 120 billion dollars is the maximum amount that the U.S. government estimates will not be repaid from the 700 billion dollar Troubled Asset Relief Program (TARP). Under TARP, struggling companies received low-interest loans to survive due to the crisis.

The money raised would then go towards addressing the enormous U.S. budget deficit, which now reaches 1.4 trillion dollars. Most of the losses in TARP are expected to come from approved loans to the automotive industry and for the bailout of insurance giant AIG. Details of the new tax are expected to be presented next month during Obama’s budget presentation for 2011. The proposal for the tax must also be approved by Congress. The introduction of a tax on large banks could boost Obama’s popularity among the public, which does not view Wall Street favorably. The announcement of the new tax proposal came just a day after the largest U.S. bankers testified before a congressional committee investigating the causes of the financial crisis. Alongside Obama’s proposal for a new tax, Congress is also developing comprehensive financial regulatory reform.

Fed Introduces Consumer Protection from Greedy Credit Card Companies

Meanwhile, the U.S. central bank has announced new rules aimed at better protecting Americans from sudden increases in interest rates on credit card loans. The new rules, which will take effect on February 22, prohibit interest rate increases during the first year of opening an account with credit card issuers. After the first year, credit card companies must notify customers 45 days in advance of any interest rate increases. The new rules will also prohibit, with a few exceptions, increases in interest rates on existing credit card debt. For example, this will be allowed if the customer is more than 60 days late on their payments. Additionally, credit card issuers will be prohibited from issuing credit cards to individuals under the age of 21, unless a parent is able to pay those bills. “These rules, the most comprehensive to date, herald a new era for credit card users in the U.S.,” comments Kenneth Clayton from the American Bankers Association. (H)