Some financial industry associations are pushing for the markup to be delayed until next week.
The goal is to grant new powers to the government so future administrations facing financial crises don’t need to rush to Congress for emergency bailout funds. Republican and Democratic critics of the measure counter that it perpetuates the notion of “too big to fail” that forced the government’s hand into propping up American International Group (AIG) with $180 billion.
Committee Chairman Barney Frank (D-Mass.) on Friday shifted his position in favor of firms paying into a standalone fund that could be tapped by regulators when a firm fails. The Obama administration and Frank earlier had proposed a measure that would levy a fee on firms with greater than $10 billion in assets, but only after a firm fails.
Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation (FDIC), opposed the earlier position.
Among the concerns is that the $10 billion threshold may harm large yet non-systemically risky firms. There are roughly 120 banks that have assets of at least $10 billion. The fund is intended to cover the costs of the breakup of systemically important firms that fail.
The committee is also trying to resolve differences in a much lower-profile bill that creates a new Federal Insurance Office.
The insurance lobby is divided over whether the new office should be able to coordinate and negotiate international insurance agreements on prudential matters. Insurance groups that favor the existing state-based system of insurance regulation, such as the National Association of Insurance Commissioners, argue that the new office would infringe on state rights and consumer protection statutes.
Industry groups representing large insurers and re-insurers that traditionally have supported a federal office that pre-empts state laws support the new language.
Consumer groups caution that the proposed language, backed by Rep. Paul Kanjorski (D-Pa.), is too broad and would set a ceiling on insurance regulation that could hurt insurance policyholders.
“The way that thing is written, it would basically be authorizing the Treasury Department to go become judge, jury and executioner of U.S. state insurance regulation,” said Lori Wallach of Public Citizen.
Opponents of the measure argue that Democratic lawmakers are directly contradicting the aim of an earlier bill that passed the committee. The earlier
Consumer Financial Protection Agency bill preserved the power of state officials to pursue stronger standards than the federal minimum.
“It’s like two ships passing in the night,” Michael Bird, federal counsel at the National Conference on State Legislatures, said of the two bills.
Estate tax expiration in 2010 means more lobbying now
With the estate tax set to expire next year, lobbying on both sides of the debate is picking up on Capitol Hill.
Liberal advocacy groups are getting behind a bill authored by Rep. Jim McDermottJim McDermottLobbying World Dem lawmaker: Israel's accusations start of 'war on the American government' Dem to Trump on House floor: ‘Stop tweeting’ MORE (D-Wash.) that would keep the tax in place at a lower exemption rate for estates than would legislation favored by lobbyists for farmers and small businesses.
Lee Farris, the senior organizer for estate tax policy for United for a Fair Economy, said her group supports the McDermott bill.
Farris said “it is a very different ballgame since Bush first came into the office.”
“We have just spent a huge amount bailing out Wall Street,” Farris said. “Now, it would be a lousy time to send even more money to the wealthy.”
Other organizations, such as Citizens for Tax Justice and Results, an anti-poverty group, are also behind McDermott’s bill.
While the estate tax would lapse in 2010, it would return the following year to what it was before the Bush administration passed its first round of tax cuts in 2001 — a tax rate of 55 percent and an exemption for those with assets valued at $1 million or below at the time of their death. Current law has the tax rate at 45 percent and those with assets valued at or below $3.5 million earning an exemption.
If passed before Congress leaves this year, McDermott’s bill would permanently set up a $2 million exemption level and progressive tax rates for assets valued higher than that level. Farris believes the bill would yield the most government revenue, which could be used for healthcare reform and other federal programs.
Meanwhile, business associations have begun to shift their support for full repeal of the estate tax to a compromise bill offered by Rep. Shelley Berkley (D-Nev.), which would set the exemption level at $5 million and the tax rate at 35 percent. Other Ways and Means members are also co-sponsoring the bill, including Reps. Kevin BradyKevin BradyMnuchin: Trump orders take aim at Dodd-Frank, tax regs Tax reform hearing appears to be delayed GOP under pressure as tax reform deadline slips MORE (R-Texas), Artur Davis (D-Ala.) and Devin Nunes (R-Calif.).
The American Farm Bureau Federation and the National Federation of Independent Business were quick to endorse the bill when it was introduced more than a week ago. Since then, the National Cattlemen’s Beef Association has come out in support of the bill as well. Most of the trade groups’ members would go untaxed if Berkley’s bill became law.
Despite the pick-up in lobbying, Congress may just pass a one-year extension of current law. Farris said she could get behind that if there is enough time to address estate tax reform later in 2010.
“This tax cut looks like one that should be reversed,” Farris said.
More lobbyists terminating registrations, study finds
A joint report by two watchdog groups has found lobbyists are terminating their registrations at a faster rate than last year.
The study by OMB Watch and the Center for Responsive Politics found that there were more than 1,400 de-registrations during 2009’s second quarter — a marked increase for any reporting period during this year or last.
Obama signed an executive order on his first full day in office to close the revolving door between the private and public sectors. He has also restricted lobbying on the stimulus package and has asked federal agencies not to appoint lobbyists to their advisory committees.
Those actions by the administration could lead lobbyists to terminate their registrations under the Lobbying Disclosure Act (LDA). Consequently, some public interest groups are concerned that transparency may suffer as lobbyists still lobby but end their LDA registrations and take on new titles, such as “senior adviser,” at their firms.
“While we can’t draw a direct link between the president’s executive order and the increased pace of terminations during the second quarter of 2009, we can say that they came at a most controversial time,” Lee Mason, OMB Watch’s director of nonprofit speech rights, said in a statement.