Brown’s threat gets bank tax removed
Finance bill’s funding reworked
WASHINGTON — Senator Scott Brown yesterday forced Democrats to remove a $19 billion tax on big banks and hedge funds from the proposed Wall Street regulatory overhaul, the second time the Massachusetts Republican has used his pivotal role in the Senate to influence the legislation in favor of major financial institutions.
After Brown threatened in writing yesterday to oppose the package unless the $19 billion tax was eliminated, House and Senate lawmakers reconvened late yesterday and agreed on a new way to pay for the additional regulatory oversight in the sweeping legislation, which is intended to help prevent another economic crisis like the 2008 market meltdown.
Instead of the tax, Congress would use $11 billion in funds from the 2008 bank bailout, combined with a small increase in bank fees paid to the Federal Deposit Insurance Corp.
With the revisions in place, the House is planning to vote on the final proposal today; the Senate could vote later in the week, although the timing has been complicated by services for Senator Robert C. Byrd, a West Virginia Democrat, who died Monday. Even with the changes, Brown’s office did not respond to requests for comment, and the senator did not immediately signal support.
Brown vowed during his special election campaign in January to change the way Washington operates, decrying Washington deal-making. Yet he has proved to be a highly adept negotiator in his own right on the Wall Street overhaul bill, using the leverage of his swing vote in the Senate to win key concessions from Democrats who could not overcome a GOP filibuster without his help.
“When you’re in the Senate, you’re in the Senate — doesn’t matter if you’ve been here 30 years or 30 days,’’ said Senator Bob Corker, a Tennessee Republican, who has been a key negotiator on the bill.
Brown, as a condition of his support for an earlier version of the bill, previously won provisions allowing
Yesterday, Brown again forced changes desired by the financial industry, the sector that produced the most campaign contributions for his election. Brown said he was looking out for consumers.
“I’ve said right from the beginning that I can’t support a bill that’s going to add a $19 billion bank tax,’’ Brown told reporters yesterday. “You think the banks are going to pay it? No. The individual consumers are going to pay this in the middle of a two-year recession, through higher ATM fees, credit card, bank fees.’’
The issue underlying the drama was how to handle costs of beefing up Wall Street oversight.
The previous Senate version of the bill that Brown supported would have increased the federal budget deficit by about $19 billion, according to estimates by the nonpartisan Congressional Budget Office. But when House and Senate negotiators got together last week to produce a final compromise, they inserted a last-minute tax on banks with assets over $50 billion and hedge funds with assets above $10 billion to cover the costs of new bureaucracy and for a fund to help unravel troubled institutions.
The tax was added around 3 a.m. Friday, toward the end of a marathon conference committee hearing, leading to further criticisms from Brown and other Republicans of a tax deal struck by Democrats in the dead of night. Two Republican senators from Maine who had joined Brown in support of the previous Senate bill — Olympia J. Snowe and Susan M. Collins — also expressed opposition to the tax, but did not say they would vote against the bill, nor did they put their concerns in a public letter, as Brown did yesterday.
The tax would have been levied over five years on only the nation’s biggest banks. It would have raised about $4 billion a year, a sum that Representative Barney Frank has said is no more than bankers’ salary bonuses.
“I’m puzzled that my Republican friends wanted to come to the rescue of large financial institutions,’’ Frank, a Newton Democrat and the chairman of the House Financial Services Committee, said yesterday.
Brown sent a letter yesterday morning to the top House and Senate negotiators — Frank, and Senator Chris Dodd, of Connecticut, to reiterate his strong opposition to the tax.
“If the final version of this bill contains these higher taxes, I will not support it,’’ Brown wrote.
Brown said Dodd and Frank should “find a way to offset the cost of the bill by cutting unnecessary federal spending.’’
Brown did not identify where those cuts should be made, but wrote, “There are hundreds of billions in unspent federal funds sitting around, some authorized years ago for long-dead initiatives. Congress needs to start looking there first, and I stand ready to help.’’
Rather than looking for cuts, Democrats scrambled for a new plan that would help win over several Republicans.
The revised agreement, which passed last night after a two-hour meeting, involves using about $11 billion from immediately closing the Troubled Asset Relief Program, created to buy toxic assets and help prop up failing banks during the downturn.
Additional funding would come from new requirements that the FDIC charge higher rates. The so-called reserve ratio would increase from 1.15 percent to 1.35 percent under the new plan, requiring fees on banks to increase. Only financial institutions with more than $10 billion in assets would be subject to the increased fees.
Republicans railed against the new proposal, calling it “disingenuous,’’ “smoke and mirrors to the extreme,’’ and “accounting chicanery.’’
“This ranks right at the top of the list of pure deception,’’ said Senator Judd Gregg, a New Hampshire Republican. “If we did this in a private sector action, we would all be in jail. This is fraud on the American taxpayer!’’
He said the TARP money was to go back into the Treasury and drive down the deficit, not help pay for new spending.
Brown was one of four Republicans to support the Senate package, but his opposition had complicated passage of the final bill. President Obama has hoped to sign the bill by July 4.
There are 57 Democrats who are expected to vote for the bill, including Senator Maria Cantwell, a Washington Democrat who had opposed the measure previously because she did not think it was far-reaching enough.
Collins and Snowe did not immediately signal whether the changes were sufficient, but top Democrats said they expect the changes to be enough for them to vote for the final bill.
The final vote that Democrats need could come from either Brown, or from a new appointee to Byrd’s seat. If Brown signals support, the vote could be held this week; if not, Democrats would probably wait until the second week in July, once a replacement for Byrd has been named by West Virginia’s Democratic governor.
Matt Viser can be reached at email@example.com.