White House wants banks to pay for auto bailout losses

David Shepardson/ Detroit News Washington Bureau

Washington— The Obama administration said Monday it wants to make the nation's largest banks pay for the losses incurred in the $85 billion auto bailout and other bailout programs.

As part of the administration's proposal to cut the deficit by more than $3 trillion over 10 years, the White House has resurrected a proposal to create a "Financial Crisis Responsibility Fee" — a move that would raise $30 billion over 10 years.

The fee is aimed at recouping losses from the government's $700 billion Troubled Asset Relief Program — the emergency fund created in 2008 by Congress to rescue banks, insurance companies and automakers.

In January 2010, President Barack Obama first proposed imposing a fee on big banks to cover auto losses. At the time, the fee was expected to raise $90 billion over 10 years, from the 50 largest institutions, including Ally Financial Inc., the government-owned Detroit-based auto and mortgage lender.

The smaller proposal to raise $30 billion over 10 years was also included in Obama's budget proposal released in February.

Treasury Secretary Timothy Geithner defended the proposal at a briefing with reporters Monday.

"That proposal is designed to make sure that if there are any losses from the emergency actions we took to put out the financial fires of '08 and '09, that we recover those losses in the form of a fee on the institutions that benefited most directly from those programs," Geithner said.

Last month, the Treasury Department raised the government's estimate of taxpayer losses due to the auto bailout by more than $400 million to $14.33 billion.

Overall, the Treasury Department hiked its estimates that it will lose $36.7 billion on the TARP program, including the value of some AIG shares. That's up from an earlier estimate of $29.6 billion. The administration's long-term forecast is a loss of $48 billion from the program.

About $126 billion of the $470 billion used in the Troubled Asset Relief Program is outstanding. The losses include $46 billion used by Treasury for housing programs.

The government is expected to make an overall profit on its bailout of most financial institutions — but that will be offset by losses in autos and the housing program.

At current share prices, the government would lose about $15 billion on its rescue of General Motors.

The government has recovered about $23.1 billion of its $49.5 billion bailout of GM and still holds a 26.5 percent stake — or 500 million shares — after it shed about half of its majority stake.

The government lost $1.3 billion on its $12.5 billion bailout of Chrysler Group LLC and completely exited its bailout of the Auburn Hills automaker in July. Fiat SpA now holds a majority stake in Chrysler.

The government's efforts to shrink more of its GM stock and part of its majority stake in Ally have been hampered by the weak overall stock markets.

The U.S. Treasury Department plans to raise $5 billion as part of a $6 billion offering when Ally launches an initial public stock offering — which has been on hold for several months.

The Treasury Department owns a controlling 74 percent stake in Ally as part of the $17.2 billion bailout during the financial crisis.

Other proposals in the deficit program include raising security fees on airline tickets to $5 each way —and to $7.50 by 2017 —a move that would raise $24 billion over 10 years.

It would also allow the Pension Benefit Guaranty Corp. to hike some insurance premiums on pensions and to let the U.S. Postal Service end Saturday delivery to shore up its struggling finances.

dshepardson@detnews.com

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