House Strips Fed Dividend Cutbacks from Highway Funding Bill

The House today voted 371-54 to approve a long-term highway funding bill. Just prior to passage, the House overwhelmingly approved measures that would remove controversial funding methods from the bill. The House’s highway bill no longer includes a substantial cut to the dividends paid on the Federal Reserve Bank stock that national banks and other Fed member banks are required to hold. The House also voted to strip out an ABA-opposed extension of higher guarantee fees.

The House vote now sets up a conference with the Senate to reconcile differences in the legislation. The Senate’s bill, passed in July, included the Fed dividend cut. Instead, the House bill draws down the Fed’s capital surplus account to pay for highway spending.

ABA, the state bankers associations and bankers have been working aggressively to remove the dividend cut. “This overwhelming vote in the House is a clear indication that members on both sides of the aisle understand that arbitrarily altering the Federal Reserve dividend is bad public policy,” commented ABA EVP James Ballentine.

“This is not perfect policy, but it is much better than the alternative,” said Rep. Randy Neugebauer (R-Texas), who proposed the amendment. “This preserves the budget neutrality of the transportation bill and counters irresponsible proposals sent over by the Senate.” Neugebauer added that he hoped Congress will ensure transportation funding “comes from transportation users and not completely unrelated sectors of our economy.”

In related news, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) successfully offered an amendment yesterday that includes three ABA-backed provisions to expand the number of banks eligible for the 18-month exam cycle, equalize the SEC registration and de-registration thresholds for savings and loan holding companies and reduce the burden of unnecessary privacy notice paperwork.

The highway bill also includes the Senate’s language reauthorizing the Export-Import Bank — a top priority for ABA’s trade finance subsidiary BAFT — further advancing efforts to revive Ex-Im’s authority to issue new loan guarantees.