A group of senators and representatives today issued a reconciled version of a long-term highway funding bill that includes a modified but still 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 provision — strongly opposed by ABA — was included in the Senate’s version of the bill but the House voted to strip the provision out last month.
The final legislation, which will now be voted on by both the House and Senate, will apply the cut only to banks with more than $10 billion in assets. Effective Jan. 1, the dividend paid to those banks will drop from 6 percent to the latest high yield on 10-year Treasurys (currently around 2.15 percent, higher than the originally proposed 1.5 percent), but no higher than 6 percent. The $10 billion threshold would be indexed to inflation.
“Rewriting a significant portion of the Federal Reserve’s charter and siphoning off a bank dividend payment to pay for highway infrastructure sets a bad precedent that should give other industries serious cause for concern,” said ABA’s Rob Nichols. “Banks shouldn’t be used like an E-ZPass to pay for highways. Dramatically reducing the dividend rate — without hearings, consultation with committees of jurisdiction, study or analysis of any kind whatsoever — is extremely bad public policy.”
The reconciled legislation also retains a measure from the House version that draws on amounts exceeding $10 billion in the Fed’s capital surplus account. It leaves out an ABA-opposed extension of higher guarantee fees, includes language reauthorizing the Export-Import Bank and repeals a provision in the recent budget bill that would have hindered the private-sector delivery of crop insurance.
While ABA opposed cutting Fed dividends to pay for the highway bill, the final legislation also includes several regulatory relief measures that are part of ABA’s Agenda for America’s Hometown Banks and that ABA sought to have included in the bill. These provisions would: 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, reduce the burden of unnecessary privacy notice paperwork, expand Trups CDO relief for smaller bank holding companies and establish a process for designating an area as rural for purposes of Consumer Financial Protection Bureau exemptions.