Brian M Johnson
House-Senate Resume Financial Conference - ATR Outlines Concerns
As the House and Senate will resume their financial conference today at 5:00pmEST, ATR has sent the following letter to all members of Congress outlining our continued concerns with the bill.
The full letter and PDF is below:
While we wait for the final text of the Frank-Dodd financial “reform” legislation from the Conference Committee, I urge you to vote against this expensive, dangerous, and ineffectual bill. ATR has conducted analyses throughout the entire process on this bill, and we consider the following reasons as enough individually to justify voting against the bill:
- Whereas bank regulators and the SEC failed to avert the mortgage crisis or monitor crucial firms like Bear Stearns and Lehman Brothers, this bill doubles their power and their budgets.
- The infamous “Durbin amendment” allowing regulation of debit-card interchange fees remains in the legislation to the detriment of bank customers and shareholders. Nationwide announcements of the end of fee-free checking showcase the effects of the provision. Moreover, government officials would have access to records of every individual transaction.
- Too big to fail is now here to stay, for the Federal Reserve, with the consent of the Treasury Secretary) retains the power to bail out firms, so long as it bails out similar firms as well, yet if only one firm in a category requests a bailout while its competitors managed their risk wisely, the Treasury has the prerogative to bail them out.
- Even though Fannie and Freddie are some of the biggest recipients of TARP funds and presently hold trillions of toxic assets guaranteed by US taxpayers, they escaped mention in the bill entirely. Instead, the bill punishes private-sector banks, most of which have paid back much or all of their TARP funds.
- The new SEC powers allow regulators to play favorites in selectively permitting shareholders to appoint directors via a proxy vote and could politicize the corporate selection process.
- While the Volcker Rule will decrease the risk present in the system, it likewise decreases the profitability of financial services companies for their shareholders, and it provides yet more incentives for firms to shift operations to financial centers abroad with environments more conducive to profits.
- The new Consumer Financial Protection Agency (CFPA) will have no Congressional oversight, full rule-writing authority, and no obligation to consider the safety and soundness of the banks whose products it would affect, much as Fannie and Freddie have no obligation to consider their own safety and soundness.
- Conference committee Democrats added an eleventh-hour $19 billion bank tax that can affect firms with more than $50 billion in assets (excluding banks that have deposit insurance, and Fannie and Freddie or any government-sponsored enterprise) and hedge funds that manage more than $10 billion, but the specific determination lies with the regulators. So, the provision punishes companies that have done well and thus attracted capital and further limits access to credit for small businesses.
The American people are looking to Congress to provide leadership on economic issues to lead the US into a period of growth and recovery, and this legislation offers precisely the wrong way to stimulate such growth. For these reasons, I urge you to vote against this fundamentally flawed legislation. Contact Brian Johnson in my office at email@example.com for more information.
Grover G. Norquist
New Senate Extenders Provides 105-Pages in Title III of Union Pension Regulatory Bailouts
To further coddle unions, the Baucus substitute amendment #4369 to the Tax Extenders package provides a regulatory bailout to union pensions by giving them more time to pay current liabilities.
Paving the way for Sen. Bob Casey’s (D-Penn) full taxpayer funded bailout of union pensions (S. 3157, Create Jobs and Save Benefits Act of 2010), the 105 page Title III, (pages 68-105), allows plans to extend their amortization by 15 years for single payer plans and 30 years for multi-employer plans.
The provision also allows plans to “smooth” their losses for accounting purposes. This allows plans to “hide” their current losses and liabilities – resulting in a balance sheet where the liability to asset ratio appears misleading.
Amortization, in this context, is understood as the amount of time unions will have to replenish loss funds. Smoothing is a method of accounting for market gains and losses – extending this is the equivalent of a regulatory bailout
Extending time-tables is nothing more than a regulatory bailout to unions. Exacerbating the problem will not help current retirees when only one in every 160 mutli-employer pension plan has the necessary assets to meet obligations at retirement.
Single employer plans and multi-employer plans are two different plans with different mechanisms and should be treated as such. Playing politics by only allowing the business plans (singles) to get special treatment if the union plans (multis) do is irresponsible.
These provisions must be broken up and dealt with separately on the floor using the proper channels – not shoved into 105 pages contained within a massive Extenders package.
Attempts to blame the low funding level of union’s multi-employer pension funds on the 2008 economic downturn are blatantly false. In fact, many of these plans have been hemorrhaging funds for decades. The 2008 recession simply exasperated the current trend
These proposals are much too important to be shoved in a massive tax extenders bill. Proposed pension changes deserve the full legislative treatment – committee mark-up, floor time with amendments and an up-or-down vote on the record.
Top Six Obama Mistruths From National Energy Address
In his Tuesday address to the nation, President Obama used the Gulf of Mexico tragedy to twist the facts, bend the truth, and attempt to capitalize on a national disaster to push job-killing energy tax legislation.
Below are some of the more egregious mistruths ATR found in the President’s remarks:
“We will fight this spill with everything we’ve got…we will go whatever’s necessary to help the Gulf Coast and its people recover from this tragedy.”
FACT: The President has not waived the Jones Act which prevents foreign ships from getting involved because of the federal Merchant Marine Act of 1920, which mandates that all goods shipped between U.S. ports be transported in U.S.-built, U.S.-owned and U.S. -manned ships. President George W. Bush waived the Jones Act to allow assistance from foreign countries during the aftermath of Hurricanes Katrina and Rita almost immediately. The President is preventing European companies from Belgian, Dutch and Norwegian firms with such advanced environmental technology to further his political gain.
“I have issued a six-month moratorium on deepwater drilling. I know this creates difficulty for the people who work on these rigs.”
FACT: The potential loss of 120,000 jobs and as many as 46,200 supporting jobs becoming idled by the moratorium, during the worst recession our country has experienced, creates a bit more than “difficulty” for the men and women whom these rigs employ.
“Countries like China are investing in clean energy jobs and industries that should be here in America."
FACT: We completely agree. But apparently the President forgot 80 percent of the first $1 billion spent on grants to wind energy companies went to foreign firms and jobs to build turbines overseas. In the second round of government grants, 79 percent of the $2.1 billion in grants went to companies based overseas; of this money, $2.9 billion goes to wind facilities.
“Old factories are reopening to produce wind turbines…small businesses are making solar panels.”
FACT: These are not market-created jobs – these are jobs artificially created by injecting taxpayer dollars into a certain sector stimulating artificial supply with no market demand. In Florida, the DeSoto Solar Center was supposed to be the “largest solar power plant in the United States,” according to President Obama. The Center received $150 million from the Recovery Act. After using 400 construction workers to build the site, the Solar Center now employs only two people. These jobs are not sustainable.
“People are going back to work installing energy-efficient windows…”
FACT: The President is referring to a program in the stimulus called “weatherization” which many argue is the most failed attempt to artificially create jobs in the market where they wouldn’t typically exist. With $5 billion appropriated for this project, less than 10,000 homes have been weatherized nationwide out of 593,000. Only $522 million - less than 10 percent of the money available - has been spent on weatherization. The Inspector General found the jobs impact “has not materialized” and the Government Accountability Office found the application of costly Davis-Bacon wage requirements equates to over $57,000 per home nationwide.
“Now, there are costs associated with this transition [in reference to the House passed cap-and-trade bill]. And some believe we can’t afford those costs right now. I say we can’t afford not to…”
FACT: Below are just a few of the costs* the President claims American “can’t afford not to” pay if his “vision” for America’s energy future is passed:
- Gasoline prices will rise 58 percent (or $1.38)
- Natural gas prices will rise 55 percent
- Heating oil prices will rise 56 percent
- Electricity prices will rise 90 percent
- A family of four can expect its per-year energy costs to rise by $1,241
- Including taxes, a family of four will pay an additional $4,609 per year
- Aggregate GDP losses will be $9.4 trillion
- Aggregate cap-and-trade energy taxes will be $5.7 trillion
- Job losses will be nearly 2.5 million
- The national debt will rise an additional $12,803 per person ($51,212 per family of four).
- Single-year GDP losses reach $400 billion by 2025 and will ultimately exceed $700 billion
- Net job losses approach 1.9 million in 2012 and could approach 2.5 million by 2035.
- Manufacturing loses 1.4 million jobs in 2035
Americans for Tax Reform continues to support an “all of the above” energy approach that incorporates a diverse variety of energy sources without mandates, subsidies, or taxes that artificially skew the market in favor of one form of energy over another.
* - Heritage Foundation, “Heritage Analysis of Waxman-Markey Hits Where Others Miss.” August 6, 2009. http://www.heritage.org/Research/EnergyandEnvironment/wm2580.cfm
Brief Outline of Key Provisions in Kerry-Lieberman American Power Act
In the wake of incident in the Gulf, there exists a false impetus surrounding the Democrats push for a massive energy bill with overreaching regulations, union-only mandates, and massive energy tax increases.
Despite the defeat of a bi-partisan effort to prevent the EPA from being the largest regulator of our economy, Congress is joining arms with un-elected bureaucrats to exploit and use the incident in the Gulf to ram through energy legislation.
The most recent Democrat energy regulations come in the form of the misnamed American Power Act, introduced by Sens. Kerry (D-Mass.) and Lieberman (D-CT). ATR has outlined some of the provisions of this 2,000-plus page bill below.
Obama's Energy Policy Flip-Flops & Offshore Drilling Moratorium Could Cost 120,000 Jobs
In response to the incident in the Gulf of Mexico, the Obama Administration issued a six month drilling moratorium and increased licensing and regulatory requirements. Obama’s “response strategy” to inhibit oil production will cost hundreds of thousands of workers their jobs – further exacerbating the current negative economic situation.
Specifically, estimates from Wood Mackenzie Research and Consulting show the six month moratorium will result in the following consequences:
- The 33 drilling platforms which support some 1,400 workers, offshore and onshore will be forced to shut down
- As many as 46,200 jobs could be idled by the moratorium
- These are well-paying jobs – $5-10 million per month, per platform in lost wages
- Long-term job losses as a result of the moratorium could reach 120,000 by 2014
- The State of Louisiana estimates that the deep-water drilling suspension will result in a loss of 3,000-6,000 in-state jobs in the first 2-3 weeks and potentially more than 20,000 Louisiana jobs within the next 12-18 months
- Louisiana estimates that if the suspension of deep-water drilling activity continues for a long period, the state could lose more than $20,000 in the next 12-18 months
Additionally, preventing offshore oil exploration will undermine America’s energy security and reduce state revenue during a time when states have an “over-spending” problem:
- A six-month moratorium on new drilling activity could result in a loss in deepwater Gulf production of 80,000-130,000 barrels per day
- A longer-term delay could lead to a loss of oil and gas production equal to 350,000 barrels of oil per day by 2015
- 80 percent of the Gulf oil and 45 percent of natural gas come from deepwater wells
- 58 percent of the more than 7,300 active leases in the Gulf of Mexico today are in deep waters – including the 20 highest producing leases in the Gulf
- A six-month moratorium on new drilling activity could result in $120-$150 million in lost royalties to the federal government and a $300-$500 million decline in government revenue in 2011
“First the president was against shallow drilling and offshore expansion, then he supported it; now he’s against expansion but in favor of shallow drilling. While at the same time trying to repeal the Sec. 199 domestic manufacturers’ tax deduction passing a $13 billion tax onto every American family in the form of higher energy costs,” said ATR President Grover Norquist. “For the sake of our economy, I hope he picks a national energy policy and sticks with it.”
TAKE ACTION: Senate Will Vote Today to Prevent the EPA from Regulating the Entire US Economy
Today the US Senate is beginning debate on Sen. Murkowski’s (R-Alaska) EPA Resolution of Disapproval (SJ Res 26).
The Resolution states:
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That Congress disapproves the rule submitted by the Environmental Protection Agency relating to the endangerment finding and the cause or contribute findings for greenhouse gases under section 202(a) of the Clean Air Act (published at 74 Fed. Reg. 66496 (December 15, 2009)), and such rule shall have no force or effect.
There will be up to six hours of debate followed by a vote on the motion to proceed to the resolution.
If the motion to proceed to passes then the Senate will have one hour of debate followed by a vote on final passage of the resolution. The votes on the resolution only require a simple majority (51 votes) under the Congressional Review Act.
The vote is expect around 3:45 this afternoon. YOU CAN HELP STOP THE EPA FROM REGULATING ALL U.S. BUSINESSES.
The following offices need to hear from you only if you live in the state the Senators represent. Tell them to vote "YES" on Murkowski SJ Resolution 26.
Sen. Johnson (South Dakota) - (202) 224-5842
ATR will rate against a "no" vote on this resolution in our annual Congressional Scorecard. Voting against this resolution will negatively effect a Senators contention for ATR's "Hero of the Taxpayer" award. ATR sent a letter to all members of the Senate urging them to support this resolution.
Please let us know what type of feedback you receive from your Senator’s office by leaving a comment below and on Twitter by replying to @TaxReformer (ATR’s official Twitter handle).
Financial Reform Is Not Over - Conferees Have 12 Major Differences to Iron Out
Despite the House and Senate passing their own versions of financial reform legislation (HR 4173 and S 3217), the battle is far from over. Now, the bills must be sent to a bipartisan conference committee for reconciliation. Americans for Tax Reform identified 12 major differences between the two bills that conferees must deliberate over.
The Senate conferees are, Sens. Dodd (D-Conn.), Chambliss (R- Ga.), Corker (R-Tenn.) Crapo (R-Idaho), Gregg (R-N.H.), Harkin (D-Iowa), Johnson (D-S.D.), Leahy (D-Vt.), Lincoln (D-Ark.), Reed (D-Nev.), Shelby (R-Ala.), and Schumer (D-N.Y.). The House is expected to announce their conferees this week and it is still undetermined if this will be an open or closed session.
“This bill allows the government to spy on every Americans’ personal bank account and track their eBay purchases which they can share with Wall Street – the least they could do is have an open and transparent reconciliation process,” said ATR President Grover Norquist.
The main differences identified by ATR include: corporate governance, proprietary trading, addressing too big to fail, the regulation of derivatives, auditing of the Federal Reserve, the establishment of consumer financial protection agencies and their funding, government regulation of debit and credit card transactions, the treatment of capital reserves, a resolution fund tax on large firms, auto-dealers exemptions and the threshold at which hedge funds must register with the SEC.
“It is not the role or responsibility of the government to intervene in what should be a private contractual relationship between retailers and merchant card transactors – the Senate bill contains this provision while the House bill, smartly, does not,” added Norquist. “This is just one of twelve major differences.”
A full list of the 12 differences highlighted by ATR can be found here.
Vote on EPA Resolution of Disapproval This Week - Call Your Senator
This Thursday, June 10th the Senate will take up Sen. Murkowski’s EPA Resolution of Disapproval (SJ Res 26) under a consent agreement that was reached before the recess.
There will be six hours of debate on the motion to proceed followed by a vote on the motion to proceed.
If the motion to proceed vote achieves a simple majority (51 votes) then there will be one hour of debate on the resolution followed by a vote on final passage.
Remember - only a simple majority is required on the motion to proceed and final passage. The list of co-sponsors can be found here. If your Senator is not on this list, please consider calling their office and asking them to join.
ATR is circulating the below letter to all Senators urging them to support this resolution. Click here for the PDF document of this letter.
On behalf of Americans for Tax Reform, and millions of taxpayers nationwide, I urge you to support Senator Murkowski’s resolution (S.J.Res. 26), regarding the Environmental Protection Agency’s new restrictions on carbon emitting businesses. Senator Murkowski’s resolution of disapproval is an attempt to stop the Environmental Protection Agency (EPA) from regulating greenhouse gas emissions under the Clean Air Act.
Unable to pass greenhouse gas regulations through Congress, members of the current administration have attempted to shape American energy policy via the EPA. In a February 22, 2010 letter sent by EPA Director Lisa Jackson to Senator Rockefeller, she wrote:
“I expect that EPA will phase-in permit requirements and regulation of greenhouse gases for large stationary sources beginning in calendar year 2011... In any event, EPA does not intend to subject the smallest sources to Clean Air Act permitting for greenhouse-gas emissions any sooner than 2016.”
Unabashedly stating her intentions to begin issuing carbon permits, Lisa Jackson looks to enact controversial cap-and-trade like legislation on her own. This administrations attempt to subvert Congress, and the will of the American people, by enacting back-door carbon regulations is reprehensible. The EPA should not act as chief regulator of America’s economy, it was never intended to.
Acting as a safeguard for the American people, Senator Murkowski’s resolution of disapproval would ensure that the EPA could not overhaul America’s energy industry, and subsequently the American economy. With the American economy still sluggish and unemployment hovering around 10 percent, any carbon regulation would be disastrous.
Facing carbon regulations, energy producers would have no choice but to raise energy prices, passing the cost of EPA’s regulations to consumers. Undoubtedly, higher energy prices would result in lost productivity and jobs while reducing America’s global competitiveness. Energy taxes divert money from the most productive sectors of the American economy to less efficient energy sources. Companies considering investing in the U.S. already must weigh America’s inexplicably high corporate tax rate. Compounding an energy tax to an already high business taxes would certainly deter foreign investment – further prolonging the current downturn.
Action against the EPA’s imminent carbon regulation is necessary. A total of 41 Republican and Democratic Senators, led by Senator Lisa Murkowski of Alaska, have introduced a “resolution of disapproval” (S.J.Res. 26) that would prevent the EPA from wreaking economic havoc. The disapproval resolution needs a total of 51 votes to pass the Senate – I urge you to join them.
For more information, contact Federal Affairs Manager handling energy policy Brian Johnson at firstname.lastname@example.org or 202.785.0266.
Grover G. Norquist
ATR Analyzes Differences Between House and Senate Financial Reform Bills
Both the Senate and the House have passed different financial reform bills (HR 4173 and S 3217). Now, the bills are being sent to a bipartisan conference committee for reconciliation. At this point, ATR has identified twelve major differences remaining between the two bills:
- House: Shareholders get non-binding vote on executive pay; corporate directors set compensation policy; requires all institutions with $1bn or more in assets to disclose the structure of all incentive-based compensation to regulators (HR 4173 §2002-2004)
- Senate: Shareholders get non-binding vote on executive pay; includes “Clawback” provision in which executives would give back compensation based on inaccurate financial statements; gives the SEC the authority to offer shareholders proxy access to nominate directors (S 3217 §951-957, S 3217 §971-973)
The new SEC powers allow regulators to play favorites in selectively permitting shareholders to appoint directors via a proxy vote and could politicize the corporate selection process.
- House: Does not ban proprietary trading (Volcker Rule was proposed after House passed its bill)
- Senate: Includes a version of the so-called Volcker Rule, which would prevent banks from making investments with their own money for their own profit, but regulators will first study such trading before restricting it (S AMDT. 3931)
According to the Wall Street Journal, “Mr. Frank’s vocal support for the Volcker Rule increases the chances it will likely be incorporated into the final legislative package, which could be signed into law by July 4.” While this will decrease the risk present in the system, it likewise decreases the profitability of financial services companies for their shareholders.
Too Big to Fail
- House: Creates a $150 billion fund of levies on largest financial firms to cover costs of firms' failures; creates 11-member Financial Stability Council, made up of existing regulators that will oversee the financial system; includes a provision that would empower the government to force any bank to stop certain practices, or even divest certain operations, if regulators fear there is a risk posed to the broader economy. (HR 4173 §1001-1110)
- Senate: Costs for failed firms would be pooled to largest firms after a failure; large, failing firms can be liquidated in a process similar to that used by FDIC to seize a failing bank; creates 9-member Financial Stability Council made up of existing regulators to oversee the financial system and recommend to the Fed new rules to govern complex firms to ensure their stability (S 3217 §111-121, S 3217 §202-211, S.AMDT.3737)
The House provision allowing this committee of bureaucrats to stop any business practices that it deems unfit represents an unnecessary intrusion into the market. If investors are willing to tolerate a risk, then government should allow them to assume that risk.
- House: Most derivatives must be traded and cleared through exchanges and monitored by the SEC and CFTC with wide exemptions for end-users. (HR 4173 §3110, HR 4173 §3201-3210)
- Senate: Mandates exchange trading and clearing for most derivatives, with a limited end-user exemption; forces federally-insured banks to spin-off their swaps desks at a cost of billions in lost revenue and cease trading derivatives (S 3217 §712-733, S AMDT. 3739.)
As Mike Cavanagh, chief financial officer of JPMorgan Chase, explains, “The net result is going to be a shift in the competitive balance in favor of international banks and unregulated entities, which would be very detrimental to the U.S. banking system and economy.” Likewise, the bill decreases the profitability of U.S. firms relative to foreign competition, and it would not have averted the mortgage collapse. Plus, Blanche Lincoln’s (D–Ark.) amendment to require spinoffs would slash profits radically and push capital offshore while preventing domestic firms from hedging risk, and it likely will not make it to the final bill. Mr. Frank said, “I don't see the need for a separate rule regarding derivatives because the restriction on banks engaging in proprietary activities would apply to derivatives as well as everything else.”
- House: Allows GAO audits of the Fed; Fed is prevented from injecting money into financial institutions; Fed loses consumer protection oversight (HR 4173 §1008)
- Senate: Allows one-time GAO audit of the Fed; Fed retains oversight over smaller, regional banks; Fed can break apart large companies that pose a threat to the financial system (S 3217 §1151-1158)
Given that the metric for whether a firm “poses a threat to the financial system” is inherently vague, this expansion of power from the Senate bill could easily be used to pursue a political agenda.
- House: Creates a new Consumer Financial Protection Agency (CFPA) consolidated from seven other agencies, with an independent director and budget; gives the CFPA full rule-writing authority; excludes auto dealers, accountants, and real estate agents, among others, from oversight (HR 4173 §4101-4410)
- Senate: Creates a Bureau of Consumer Financial Protection consolidated from seven other agencies, placed inside the Federal Reserve, with an independent director and budget whose rules could be vetoed by a two-thirds vote of a council of bank regulators; excludes small businesses that do not engage in financial activities from oversight (S 3217 §1011-1029)
Regarding having the new bureau of oversight in the Fed, Frank asserts that “the Fed feels it’s like, you know, having your ex-wife’s brother living in the house after you got a divorce.” Besides, as the Senate bill put the agency in the Fed to win over Sen. Bob Corker (R-Tenn.), and as he’s already voted no, Frank predicted, “You’ll have an independent CFPA.” But, as POLITICO reports, “Republicans charge that a sprawling new agency could reach into mom-and-pop businesses that give credit to customers and will certainly play up small-business opposition to the agency.” In short, the new agency would cost more taxpayer dollars, impede small business owners with compliance and regulation requirements, and do little more than is done by today’s agencies.
- House: No changes to present law
- Senate: Aims to rein in fees placed on debit cards by issuing rules on the fees that merchants pay; grants oversight on essentially all banking transactions with no stated use of the information. (S AMDT. 3989)
The Hill reported that “[Sen.] Durbin [passed] legislation that requires the Federal Reserve to issue rules on swipe fees for debit cards to ensure fees are ‘responsible and proportional’ to processing costs. The legislation does not ban swipe card fees. Durbin had won strong backing from merchant and retail groups. Durbin said the restrictions would not apply to banks and credit unions with $10 billion or less in assets.” ATR believes that it is not the role or responsibility of the government to intervene in what should be a private contractual relationship between retailers and merchant card transactors. Additional privacy concerns surrounding the collecting of all banking transactions remain problematic.
Pre-empting State Law
- House: Does not preempt state law, but instead allows states to put in place protections that are stronger than those at the federal level; forces regulators to examine and preempt state law on a case-by-case basis. (HR 4173 §4404)
- Senate: Increases the federal government’s ability to prevent states from adopting and enforcing their own, tougher standards on federally-regulated banks. (S 3217 §1041-1047, S AMDT. 4071)
According to Think Progress, “during the buildup of the housing bubble, several states attempted to police predatory subprime lending. However, they were repeatedly preempted by federal bank regulators. In one instance, state regulators in Illinois tried to go after a subprime lending subsidiary of Wells Fargo, but “the company quickly reshuffled its legal paperwork and moved the offending sub-company under its nationally chartered bank,’ exempting it from Illinois law.” And, “The history of the economic crisis shows that this would be a big mistake. And in case [this group of Senators] needs more evidence, it can look at these two studies from the University of North Carolina’s Center for Community Capital.” Moreover, notice that the Senator from Delaware, the banking state, proposed this amendment; it does nothing but harm consumers.
- House: No change
- Senate: Forces banks with more than $250 billion in assets to meet higher, unspecified, capital requirements (S.AMDT.3879)
As Think Progress reports, “while not directly laying out new capital requirements, Collins’ amendment sets a minimum, ensuring that there is some statutory requirement that regulators can’t be talked into dismissing.” But, “officials from the Treasury Department, Federal Reserve and Wall Street are working to kill it. This could also potentially complicate international negotiations on banking rules. The amendment, [backed by FDIC Chairman] Sheila Bair, would force banks with more than $250 billion in assets to meet higher capital requirements.” It is not the role of the federal government to mandate that banks keep a specified percentage of their investment portfolio liquid – that’s what consumers and markets are for.
Resolution Fund Tax
- House: Raises a $150 billion resolution fund from the biggest financial firms, which would be tapped in order to unwind a failed institution. (HR 4173 §1604)
- Senate: Funds the resolution authority for unwinding systemically risky financial institutions with an after-the-fact levy on the biggest financial firms; orders the Treasury Department to front any money necessary for the unwinding (S 3217 §204-206)
This additional tax on the banking sector that would be passed on to consumers and shareholders from this proposal does nothing but punish the banking sector indiscriminately in that stable banks would pay for the unwinding of their riskier, failing, competitors. In short, it punishes the banks that invested safely.
- House: Exempts auto dealers with financing operations from falling under the purview of the new consumer protection agency. (HR 4173 §4205)
- Senate: Sen. Sam Brownback (R-Kan.) attempted to insert a similar exemption in the Senate bill, arguing that auto dealers did not cause the financial crisis. But the amendment never came up for a vote.
This slight difference stems from district entitlements and will likely be cut in the final version of the bill. ATR believes that no industry should be regulated by this new agency.
- House: Requires hedge funds with more than $150 million under management to register with the SEC; excludes private equity (HR 4173 §5003-5007)
- Senate: Requires hedge funds with more than $100 million in assets to register with the SEC; requires firms that package loans into securities to hold 5% or more of the credit risk (S 3217 §403-409)
Given that experienced, professional investors in insurance companies and pension funds invest in hedge funds that are not registered, and given that compliance costs take a large bite out of returns, this intrusion is unwarranted and politically motivated.