U.S. lawmakers reconvened the House- Senate conference on the financial-overhaul bill to eliminate a $19 billion bank fee that drew objections from Republicans.
Democrats inserted the fee near the end of last week’s marathon 20-hour negotiating session, which ended when the conference committee approved legislation and sent it to the House and Senate for final votes. The fee would assess large banks and hedge funds to help cover the cost of imposing the biggest rewrite of Wall Street rules since the 1930s.
Instead, the Democrats’ new plan would cover the shortfall in the bill by closing the Troubled Asset Relief Program and increasing the size of the fund that the Federal Deposit Insurance Corp. maintains to repay customer deposits when a bank fails, Senate Banking Committee Chairman Christopher Dodd said.
Changing the bank fee could end an impasse that threatened to delay the final Senate vote after the death of Senator Robert Byrd, a West Virginia Democrat. Byrd’s absence left Democrats in need of all four Republicans who previously backed the measure. One of those Republicans, Senator Scott Brown of Massachusetts, withdrew his support earlier today, citing the fee.
“Because there was a reaction to it, we tried to come up with an alternative idea that would reduce those concerns and allow for us to meet the obligations of this bill,” Dodd, a Connecticut Democrat, said today at the start of the conference meeting.
In a letter today to Dodd and House Financial Services Committee Chairman Barney Frank, Brown said he could not accept the bank fees. “If the final version of this bill contains these higher taxes, I will not support it,” he wrote.
July 4 Goal
Banks with more than $50 billion in assets and hedge funds with more than $10 billion in assets would have been responsible for paying the fee.
“I’m surprised what they are objecting to is making Goldman Sachs and JPMorgan Chase and Citigroup pay for the cost of the regulation,” Frank said about Republican concerns. “Instead, the pay-for is going to be rescinding the unused TARP money, which, frankly, would have been rescinded at some point anyway.”
Frank, who led the negotiations, said the full House will likely vote on the final bill tomorrow.
Under the proposed fix being circulated today, the “complete and immediate termination” of TARP would “get you more than about 90 percent of the way there” or about $11 billion, Dodd said.
Lawmakers also would raise the level of funds the FDIC is required by law to hold in reserves to insure bank customer deposits. The FDIC would increase its so-called reserve ratio from 1.15 percent to 1.35 percent, or $1.35 for every $100 in deposits. The fund is supported through fees on the banking industry.
The change would shift the burden to the largest U.S. banks since the earlier plan would have also assessed hedge funds. Dodd said small banks would be exempt from having to pay for the increase.
Final approval from the House of Representatives and the Senate is needed to get the bill to President Barack Obama’s desk for his signature. While Democrats said they had hoped to move the bill before July 4, opposition to the fee and Byrd’s death could leave Senate Democrats short of the 60 votes they need.
House Majority Leader Steny Hoyer, a Maryland Democrat, said today the House will debate and vote on the bill later this week.
Dodd is “working very hard to make sure he has the requisite number of votes” in the Senate, Hoyer said.
Obama expressed confidence that the bill would get through Congress.
Completion of the financial regulatory reform bill will “provide some certainty to the markets,” Obama said this morning after meeting with his economic advisers and Federal Reserve Chairman Ben S. Bernanke at the White House. “I think there’s going to be enough interest in moving reform forward that we’re going to get this done.”
Without Brown’s support, Senate Democrats would need to secure votes from either Senator Maria Cantwell, a Washington Democrat who has opposed the bill, or Byrd’s replacement. They also would have to retain support from Republican Senators Olympia Snowe, Susan Collins and Charles Grassley, who backed a previous version of the bill.
“The bill is not perfect, but I believe if you take out the new bank tax that on balance it would improve our financial system, and I would support it,” Collins said today.