Democratic leaders say they are a long way off from imposing tens of billions of dollars in fees on large financial institutions to recoup the cost of the Wall Street bailout.
The Obama administration earlier this year urged Congress to support a special $90 billion fee on large financial institutions, but House and Senate lawmakers have yet to draft legislation or make any significant progress on the new tax.
Senate Majority Whip Dick DurbinDick DurbinFill the Eastern District of Virginia Senators preview bill to stop tech giants from prioritizing their own products Democrats struggle to gain steam on Biden spending plan MORE (D-Ill.) and Senate Finance Committee Chairman Max BaucusMax Sieben BaucusBiden nominates Nicholas Burns as ambassador to China Cryptocurrency industry lobbies Washington for 'regulatory clarity' Bottom line MORE (D-Mont.) on Tuesday cast doubt on prospects that the tax would move quickly in the upper chamber.
“You still have a lot of outstanding pieces of business here, and some of them are being held up because of lack of pay-fors, you know, so I wouldn’t rule anything out completely,” Durbin told The Hill. “But I think it’s becoming more remote as the session comes to an end.”
“Not soon,” Baucus said of plans for his panel to consider the issue.
House Financial Services Committee Chairman Barney Frank (D-Mass.) supports the tax and pushed hard during the financial regulatory debate to pay for that bill through roughly $19 billion in fees. Those assessments would have fallen on banks with at least $50 billion in assets and hedge funds with at least $10 billion.
Frank’s proposal drew strong opposition from Senate Republicans, including Sen. Scott Brown (Mass.), who was central to passage of the Wall Street bill. Frank had to take the extraordinary step of reopening the two-week conference committee negotiations to remove the tax policy and find a different method of paying for the Wall Street bill.
That debate underscored the difficulty of passing the broader and larger tax proposed by the Obama administration earlier this year.
Treasury Secretary Timothy Geithner last week told reporters that the administration was still attempting to sway congressional lawmakers behind the bank fee. The tax is meant to cover the costs of the Troubled Asset Relief Program (TARP), the official name of the $700 billion bailout package.
“We have a legal obligation in the TARP to recoup any losses we ultimately bear from that financial rescue in the form of a fee on the financial system,” Geithner said at a breakfast held by The Christian Science Monitor. “We’re going to continue to look for a way to try to get Congress to get comfortable about how best to meet that obligation.”
On Capitol Hill, Democrats continue to support the broad outlines of the fee, but they have been unable to agree on the policy details or move any specific legislation.
In January, Obama urged lawmakers to levy a “Financial Crisis Responsibility Fee” on large banks and other institutions. The fee was designed as a 10-year plan to raise roughly $90 billion.
The government would impose a 0.15 percent fee on large financial institutions with at least $50 billion in assets. Under the administration plan, the tax would fall on a firm’s assets, except those considered core capital or deposits that are backed by the Federal Deposit Insurance Corporation (FDIC).
The policy was crafted to exempt General Motors, Chrysler, Fannie Mae and Freddie Mac. The Congressional Budget Office (CBO) in March raised questions about the fee proposal and said it was “not specified” by the administration how, exactly, it would be assessed.
The issue has barely surfaced on Capitol Hill since early May, when Geithner testified about the proposal before the Senate Finance Committee.
But with the Wall Street overhaul package signed into law, the financial industry is beginning to focus more of its attention on the tax proposal.
“Applying a new tax on financial institutions during our fragile economic recovery is unwise,” said Andrew DeSouza, spokesman at the Securities Industry and Financial Markets Association (SIFMA).
The association recently set up a small working group specifically focused on the tax policy. DeSouza said a tax would come as banks are forced to raise capital to meet new U.S. and international capital requirements and to meet the requirements in the Wall Street overhaul package.