By Silla Brush - 11/17/09 01:09 PM EST
House Democrats are looking to tweak financial overhaul legislation so that the largest firms will pay for future failures.
House Financial Services Committee Chairman Barney Frank (D-Mass.) had originally proposed that only firms with assets of $10 billion or more would pay fees to cover the costs of future government efforts to wind down failing financial firms.
"There is substantial support for my amendment or something that achieves its objective — ensuring that medium-sized firms are not unfairly taxed to fund the resolution of large, complex financial institutions," Sherman said late on Monday in a statement to The Hill. Sherman indicated that other Democrats on the committee are also looking at ways to adjust the threshold.
There are roughly 120 banks with $10 billion or more in assets. By contrast, a September report from SNL Financial, a market research firm, showed that there are only 21 banks with assets of at least $75 billion.
Credit unions and small banks have lobbied hard to raise the threshold. The National Association of Federal Credit Unions (NAFCU), for example, has taken a strong position that large credit unions, three of which have more than $10 billion in assets, should not be responsible for paying the fees.
"Our basic position is that a $10B bank poses no systemic risk and so shouldn't be assessed to pay for any costs associated with the failures of systemically dangerous institutions," said Steve Verdier, senior vice president at the Independent Community Bankers of America (ICBA). "We believe the threshold should be much higher, perhaps up to $50B. Our original testimony was that only institutions identified as systemically risky should be assessed."
The fee system has been a key source of controversy and lobbying in the broader bill that aims to give government regulators additional power to take over failing financial firms. Treasury Secretary Timothy Geithner has said that so-called "resolution authority" is a central element of the overhaul effort so that government officials are not faced with future situations where they need to turn to Congress for emergency bailout money in the middle of a crisis.