Financial Reform Bill

Lawmakers drop bank tax from reform

Marketplace Staff Jun 30, 2010

It’s still the biggest overhaul of Wall Street rules since the Great Depression. But now it’s not paid for by the big banks. Lawmakers changed the financial regulation measure last night to satisfy Republican senators, who opposed paying for it with a $19 billion tax on big financial institutions.

This bill seemed like a done deal. Then of course, a supporter of it, Senator Byrd, died. Is that what these changes are all about?

In part, yes. It was going to be a close vote anyway, then they lost one supporter in the Senate. But also right after the bill passed the conference last week, Senator Scott Brown — the Massachusetts Republican — said he didn’t like that it was paid for by a tax on the big banks. Soon after, the other Republican senators who were expected to support the bill said they agreed with Senator Brown. So Democrats, who had hoped to pass the bill this week, took out the tax and instead the money to pay for the legislation will come out of some proceeds from the TARP — the bank bailout.

Can they do that? I thought any money the government made from TARP had to go toward cutting the deficit?

Well, what they did to get the support they needed to do that was they decided to end their TARP spending ability later this month, instead of in October. That move got them about $11 billion that lawmakers say would have been spent on new TARP programs. To come up with the rest, they are raising the amount of money banks pay into the FDIC’s deposit insurance fund. One Republican senator called this budgetary smoke and mirrors. But Democrats are hoping it’ll get them over the finish line.

Do Democrats have the support to pass this thing now?

Well, they think that they do. But what are we getting for it? Cornelius Hurley, director of the
Morin Center on Banking at Boston University, expressed frustration that every time this bill
gets changed, it seems to get easier on the banks.

“This exercise in Washington on this bill, the longer it has gone on, has become more about the
November elections and less about the last crisis or the current crisis that we’re experiencing,” said Hurley.

When can we expect a vote?

The Senate is now expected to vote on this new package after its week-long 4th of July break. The House could vote today. Of course, who knows what kind of objections will spring up between now and then.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.