18 months later, a reformed financial services industry
Recent proposals by the Obama administration have been wrapped in language that suggests financial institutions don't understand our responsibility to American taxpayers or our role in strengthening our nation's economy. American taxpayers put their hard-earned funds at risk to save our financial system when the Troubled Assets Relief Program was created in October 2008. We in the financial services industry are grateful and believe it is our responsibility to repay taxpayers. Out of the U.S. Treasury's original $250 billion in direct support of the banking system, more than 50 financial institutions, including the largest banks, have paid back $167 billion plus $15 billion in interest, dividends and warrants. In a January report, the Treasury Department noted that the warrants issued by the banks as part of the TARP's Capital Purchase Program have yielded an 8.8 percent return to taxpayers from the 34 banks' warrants sold thus far.
We in the financial services industry strongly believe that all TARP recipients should repay taxpayers' investment with interest and dividends, and in accordance with the law. We also believe the government should focus first on collecting such outstanding TARP amounts before rushing to impose a tax on those that have repaid and those that never received TARP investments; such actions, as would happen under the administration's recent proposals, would only raise the cost of capital that supports millions of American companies and consumers.
Our industry is doing its part to help America rebuild by raising financing for corporations, municipalities and small businesses. State and local government issuers, with the help of our industry, sold $410 billion in municipal bonds in 2009 -- a 5.1 percent increase in total issuance volume from 2008. The proceeds financed infrastructure projects such as roads, bridges, schools and wastewater processing facilities. Meanwhile, the industry underwrote $1.1 trillion of corporate stocks and bonds in 2009, up 18 percent from 2008. These actions help businesses grow and invest in new plants and equipment, creating jobs for Americans.
Financial institutions of every size have made meaningful changes to the way they do business in the past 18 months. They have focused on increasing transparency and accountability to regulators and investors, including by implementing new practices involving compensation. Last June, the industry announced a set of guidelines for executive compensation that embraced many of the principles the Obama administration and federal regulators have advocated. Several of the largest financial institutions have adopted those guidelines and have dramatically changed their compensation policies. In recent weeks, firm after firm has announced that a greater share of discretionary compensation, or "bonuses," for top-performing employees will be awarded as restricted stock instead of cash. This is just the beginning. Early on, our industry became a strong advocate for reforms that protect against systemic risk and create a resolution authority to effectively end the concept of "too big to fail." We continue to believe that this policy, already adopted in House legislation, is the best way forward, instead of setting arbitrary limits on institutions' sizes and activities.
The success of all financial services firms -- whether globally interconnected banks, regional investment banks and brokerage houses, or small financial advisers -- is interwoven with the success of local investors and businesses, from families saving for retirement to the largest pension funds, from Main Street businesses to the Fortune 100 companies we serve every day.
America's financial services industry is working to fulfill its role in providing capital and credit to the U.S. economy. We appreciate that many Americans are struggling to make ends meet in this difficult economy, and we believe we need to do our part to help the economy recover. We also believe it is important to look beyond the rhetoric and ask the tough questions about underlying structural changes that promote responsible reforms and stability to our financial system, yet support the ability of financial firms to innovate and serve the needs of families and employers. Ultimately, it is these changes that lead managers to make good business decisions that enable their firms to focus on what our industry does best -- provide the financing for economic growth and job creation in America.
The writer is president and chief executive of the Securities Industry and Financial Markets Association.