The financial regulatory reform legislation has been amended (again). This time, the committee has agreed to remove the proposed $19 billion tax on the large banks. In addition, the Troubled Assets Relief Program (TARP) will be ended three months early.
Senators Scott Brown (R-Mass.) and Chuck Grassley (R-Iowa) had objected to the proposed tax that would have made the FDIC collect $19 billion from banks with more than $50 billion in total assets. To make up for this shortfall, $11 billion will be reallocated, which was saved by ending the TARP program early.
The TARP program, popularly referred to as the ‘bailouts’ began in October 2008, when nine large banks were forced by the Treasury department and regulators to accept government funds ‘for the good of the system’. In this program, Bank of America (NYSE: BAC) and Citigroup (NYSE: C) each received $45 billion, while Wells Fargo (NYSE: WFC) and JPMorgan Chase (NYSE: JPM) each received $25 billion.
Senators Brown and Grassley play an important role in the Restoring American Financial Stability Act of 2010, as they represent half of the Republican support of the Senate’s bill.
According to multiple reports, Senate Banking Committee Chairman Chris Dodd (D-Conn.) said he believed the modified bill would now have 60 votes in the Senate, although he also said “obviously, until they actually cast the vote you never know.” As Senator Byrd passed recently, the bill was in temporary jeopardy, but is believed to have since raised sufficient report to still push it through.
In a related item, it is expected that the Oversight Council for Systemic Risk would impose risk-based assessments on all financial companies, not just banks. The source commented: “The larger and more complex the entity, the higher potential for systemic risk, the more regulation and special assessments they will pay.” Though, the final details will likely not be nailed down for months, as the regulating agencies will have to make most of the tough decisions.
