The plan marks the latest in a slew of proposed fees, penalties and constraints the White House envisions slapping on Wall Street during the cleanup of the U.S. financial crisis, and marks a new stage in the White House's populist assault on the finance industry.
Administration officials went out of their way Wednesday to show no sympathy for big banks they acknowledged would lobby hard against the proposal.
"The banks that are in question were significantly responsible for the enormous degree of the reckless risk-taking that was borne throughout the economy," one official said.
If approved by Congress, the new tax -- which the White House calls a "financial crisis responsibility fee" -- would force about 50 banks, insurance companies and large broker-dealers to collectively pay the federal government roughly $90 billion over 10 years. Of the 50, about 35 would be U.S. companies and 10 to 15 would be U.S. subsidiaries of foreign financial firms.
A senior administration official said the largest 10 institutions would pay about 60% of the tax's total cost.
Roughly half the 50 would be U.S. banks, including the largest, Goldman Sachs, J.P. Morgan Chase, Bank of America and Morgan Stanley. Because large firms that benefited from the government's debt guarantees would also be included, the tax would hit companies such as General Electric Co. Banks that have repaid their TARP money wouldn't escape taxation.
The taxed firms are expected to pay the cost of bailout money that went to General Motors Co. and Chrysler LLC, which are exempt from the tax. The administration official defended the omission by contending that U.S. auto makers collapsed in part because of a financial crisis of the banks' making.
The numbers could change as the final tally of losses from the $700 billion Troubled Asset Relief Program is calculated. The White House estimates that with a rash of repayments, TARP costs now stand at $117 billion, down from the $341 billion it estimated last summer. Officials say costs should ultimately fall to $90 billion, about what the tax is expected to raise, but the tax will stay in place until all of the costs are recaptured.
The top five Wall Street banks earned profits of about $30 billion through the third quarter last year. The proposal will also help the administration tackle the U.S.'s budget deficit, projected to reach $1.4 trillion this fiscal year.
The banking industry has already objected to initial reports of the proposal, which Mr. Obama is expected to detail Thursday morning at the White House.
"Using tax policy to punish people is a bad idea," J.P. Morgan Chase Chief Executive James Dimon told reporters after a hearing in Washington. Mr. Dimon said it would be unfair for banks to be left shouldering the cost of the auto bailout.
The proposal wouldn't require small banks to pay the fees, administration officials said, the latest sign that Washington's post-crisis clean-up is hitting large financial institutions most heavily.
Using boldly populist language, a senior administration official rejected criticism from bank executives, lobbyists and Republicans that the fee would be passed on to consumers. Doing so would put the taxed banks at a disadvantage against small-to-medium-sized lenders that would be exempt. He suggested companies look to their bonus pools to pay the tax.
"It is just beyond the pale for any of the any of these major financial institutions to suggest that they were islands unto themselves, untouched and not benefited by the extraordinary policies that have been taken under the Obama administration," the official said.
Under the proposal, a 0.15% tax would be levied on liabilities. The tax would apply to bank holding companies, thrifts, insurance companies that own financial arms and broker dealers with at least $50 billion in assets that received assistance under TARP, the FDIC's temporary loan program or other crisis efforts.
The tax would be levied on total assets, minus a type of capital considered high quailty, such as common stock, and disclosed and retained earnings. FDIC-covered deposits and insurance policy reserves would be untaxed because such assets are already subject to federal fees, the administration official said.
Under that formulation, banks that lean heavily on funding sources other than customer deposits would pay proportionally higher taxes. That means that Goldman Sachs and Morgan Stanley could get penalized. Another big loser could be Citigroup, whose main U.S. banking unit's insured deposits represent a relatively small slice of the company's liabilities.
The 2008 law creating TARP required the White House to come up with a proposal to recoup any losses. The White House and Treasury Department considered several different options, including a tax on bank profits or a tax on transactions made by large banks.
Ultimately, the White House opted to tax bank liabilities, seeing it as a way to constrain risk at specific firms. Liabilities, traditionally, are defined as what the bank owes -- for example, customers' deposits.
Administration officials believe that the tax would also serve as a constraint against banks taking on too many risky bets with borrowed cash. Many Democrats are expected to support the levy.
House Financial Services Committee Chairman Barney Frank (D., Mass.) said Wednesday that it was "entirely reasonable" for the financial industry to make the taxpayer whole on any losses.
Rep. Scott Garrett (R., N.J.) has said any tax or fee could hinder the economic recovery and further limit the industry's ability to extend more loans. Mr. Dimon, when asked how any tax could be felt by consumers, said "all businesses tend to pass their costs on to their customers."
"How you are going to tax banks and expect them to lend more is frankly lunacy," said Rep. Jeb Hensarling (R., Texas).
As large banks appear to regain their footing on Wall Street, their standing in Washington continues to deteriorate. Sen. Bill Nelson (D., Fla.) said Wednesday that he planned to impose new restraints on executive compensation at large banks.
The new White House tax would be in addition to other fees against big banks authorized by a recent bill passed by the House that would require large financial companies to finance a $150 billion fund to pay for future failures of large companies.
White House officials have said the financial industry should do more to repay taxpayers for the extraordinary public support extended the financial crisis. Public fury at the banking industry remains high, particularly as they report high profits and pay packages while unemployment remains high.