Lawmakers reopen negotiations on financial overhaul bill
Lawmakers who thought they were done negotiating the final version of financial regulatory legislation reconvened Tuesday after key Republican supporters threatened to bolt in a sudden dispute over how the bill would be funded.
In a last-minute scramble, Democratic leaders reopened talks on the legislation after Sen. Scott Brown (R-Mass.) withdrew his support because of a plan to pay for the financial overhaul with a fee on large banks and hedge funds that would raise nearly $20 billion.
To win back Brown's support -- and get the 60 votes needed to overcome a Republican filibuster -- the House-Senate conference committee agreed Tuesday to instead end the Troubled Assets Relief Program early and shift some of the bailout effort's funds toward the financial regulation bill, a move that would yield an estimated $11 billion. The rest would come from raising premiums paid by commercial banks to the Federal Deposit Insurance Corp., whose fund serves as a safety net for consumers when their banks fail. Only banks with more than $10 billion in assets would pay the higher premium.
Democratic leaders had planned to deliver the bill to President Obama to sign into law by July 4, but the Senate banking committee's chairman, Christopher J. Dodd (D-Conn.), said Tuesday that the Senate might miss that deadline and vote on the bill after its recess next week. Timing has become complicated because the late Sen. Robert C. Byrd (D-W.Va.) is scheduled to lie in repose on the chamber's floor Thursday. The House could vote on the legislation as soon as Wednesday.
During Tuesday's talks, Republicans on the conference committee criticized the accounting methods behind the new proposals, arguing that they violated the law that created TARP, which specified that any money left from the $700 billion program be used to pay down the country's debt, not allocated to other initiatives.
"The American taxpayer should be affronted by this sleight of hand and gamesmanship," said Sen. Judd Gregg (R-N.H.).
Banking lobbyists were alarmed by the higher FDIC premiums, saying that lawmakers have opened the door to using the FDIC as a future revenue source. They said that the bill unfairly penalizes banks that have been careful with their finances. "This is yet another regulatory cost imposed on the many traditional banks that had nothing to do with causing the financial crisis," said Edward L. Yingling, president of the American Bankers Association.
After a grueling stretch of negotiations last week, the bill seemed to be sailing toward final passage by both chambers until Brown announced Tuesday he would not vote for the bill because of the bank fee, which was added late in the conference process.
"While some will try to argue this isn't a tax, this new provision takes real money away from the economy, making it unavailable for lending on Main Street, and gives it to Washington," Brown wrote in a letter to Dodd and House Financial Services Committee Chairman Barney Frank (D-Mass.). "That sounds like a tax to me."
Before Tuesday, Democrats had already made concessions to win the support of Brown, who was one of four Republican senators to vote for the Senate version of the regulatory overhaul. The Massachusetts senator was worried that a key provision, called the Volcker rule, would hurt insurance and asset management companies -- industries that are major employers in his state.
In response to concerns from Brown and other lawmakers, the conference committee exempted insurance and mutual fund companies from the Volcker rule and added a provision letting banks invest up to 3 percent of their capital in private-equity and hedge funds instead of barring them from such investments entirely.