WASHINGTON—Treasury Secretary Timothy Geithner encouraged senators to include Obama’s proposed fee on banks in financial reform legislation, speaking before the Senate Finance Committee Tuesday. Obama proposed a Financial Crisis Responsibility Fee in January to hold banks accountable for the money spent bailing out the economy.
Geithner said the fee targets institutions with assets or more than $50 billion and “excludes 99 percent of U.S. banks, which currently provide the majority of small loans to businesses and farms across the country."
The treasury secretary said institutions will be assessed on the risk they pose to the system depending on the stable or risky nature of their funding sources. He said institutions that manage their assets more conservatively will be charged less.
Geithner said the fee will "complement efforts to improve stability of our financial system by providing modest incentives against funding riskier activities with less stable funding."
At present finance reform legislation the Senate is considering does not include this financial crisis fee.
Both Democrat and Republican committee members questioned Geithner on whether the bank fee would reduce credit available to borrowers.
Senator John Kerry (D-Mass.) said the fee may affect small business by reducing available credit, reports The Hill. He quoted a Congressional Budget Office report that found a tax on banks taking extraordinary risks would reduce available credit at smaller banks.