Dear Dr. Elmendorf and Dr. Barthold:
There is widespread agreement with the President among taxpayers and members ofCongress that financial institutions should repay every dime of government money theyhave received for financial stability. Yesterday, the President proposed a “FinancialCrisis Responsibility Fee" to help facilitate that repayment. I agree with the goals thePresident articulated. We in Congress have a responsibility to ensure the legislativeproduct carries out the goals the President set. Before Congress is asked to vote onlegislation imposing such a fee, it will be important to understand the potential impact onconsumers, the criteria for applying the fee to some entities and not others, and theimplications for the security and stability of these institutions. I am writing to requestthat the Congressional Budget Office and the Joint Committee on Taxation provide ananalysis addressing the following questions about the Obama Administration’s proposed“Financial Crisis Responsibility Fee":
1. Will the fee get passed on to consumers in any manner? If so, how will it getpassed on to consumers?
2. Will the fee reduce the amount of bonuses paid by the financial institutions thatare subject to the fee?
3. What impact will the fee have on the availability of credit generally?
4. What impact will the fee have on the availability of credit for small businesses?
5. Are the financial institutions that the fee is imposed upon the same ones thatcaused the estimated losses under TARP?
6. Are there entities that caused the estimated losses under TARP that are not subjectto the fee? If so, which entities are they and what amount of the estimated TARPlosses did each entity cause?
7. Are there entities that will be subject to the fee that did not cause the estimatedlosses under TARP? If so, which types of entities are these?
8. Does the fee account for any additional losses from TARP that the Administrationmay generate as a result of future disbursement of TARP funds?
9. The Administration has estimated that unrecouped losses from TARP could be,absent the proposed Financial Crisis Responsibility Fee, $117 billion. a) Doesthis amount include the cost of IRS Notices that alleviate the tax burden on TARPrecipients that otherwise would have been imposed by Internal Revenue Codesection 382 (i.e., Notices 2008-100, 2009-14, 2009-38, and 2010-2)? b) Shouldan accounting of TARP costs include the costs of these IRS Notices? c) What isthe cost of these IRS Notices?
10. What impact will this fee have on the United States’ Gross Domestic Product?
11. Will the fee increase the security of the affected financial institutions, thusdiminishing the need for any future bailouts?
12. Are there currently any federal or state taxes based on asset value?
13. Does the Administration’s cost estimate include the cost of administration?
14. What is your estimate of the cost of the TARP program to date, including the costof administration?
15. Do you estimate that all TARP losses will be repaid by 2013?
16. What effect will this fee have on the administerability and complexity of the taxsystem?
17. What is your estimate of the value of the financial assistance provided by theFederal Reserve since the enactment of TARP and what is the potential amount oflosses associated with this assistance?
18. Does the fee recoup any potential losses as a result of the Federal Reserve’sassistance to various financial institutions?
Thank you in advance for your assistance. Please do not hesitate to contact Jim Lyons at(202) 224-4515 with any questions.
Sincerely,
Charles E. Grassley Ranking Member Senate Finance Committee
