It was always going to be a seamless transition from John Boehner to Paul Ryan. These men are cut from the exact same cloth, which is worshipping at the altar of crony capitalism. They talk a good game about about “free markets” and “entrepreneurship,” but at the end of the day, are both staunch defenders of statist, centrally planned economies, as long as the subsidies go to mega-corporations.
David Dayan, who’s excellent work I’ve covered many times here at Liberty Blitzkrieg, just published an article at the Fiscal Times outlining the plethora or Wall Street giveaways recently added onto the “Highway Bill.” One of these relates to something I’ve covered previously, the 6% annual dividend paid by the Federal Reserve to its member banks. Here’s some background from a previous post, Banks Squirm as Congress Moves to Cut the 6% Dividend Paid to Them by the Federal Reserve:
Have you looked at your checking or money market bank statement lately from JPMorgan Chase or Citibank? How about the statement showing the interest you’re earning on your mortgage escrow account with the big banks? While the country suffers through the lingering effects of the Great Recession caused by the biggest Wall Street banks, the public typically receives less than 1 percent on their deposits at the big banks, while the government has legislated a permanent, risk-free 6 percent guarantee to the Wall Street banks for their capital on deposit at the Fed. Now that’s an entitlement program that needs to die!
This corporate welfare program gets even better: if the shares of stock were acquired prior to March 28, 1942, the 6 percent risk-free dividend is tax exempt and the bank doesn’t have to pay corporate taxes on it.
There had been a Senate proposal in the Highway Bill to reduce this payout to 1.5% for all banks with more than $1 billion in assets. Naturally, the Republicans in the House, led by Paul Ryan, killed it. Wall Street always gets it way in Congress. Always.
From the Fiscal Times:
It seems bizarre that financial policy would get decided in a bill to repair roads and bridges and mass transit, but that’s the whole point of the Christmas tree strategy: If a bill is deemed “must pass,” then adding ornaments to it comprises a good strategy for getting things into law that otherwise might not receive a vote.
Ryan touted this process as a positive example of new leadership. In recent years, House bills written in secret sped to the floor without the ability for alterations. But on the highway bill, over 80 amendments got a vote on the House floor, out of hundreds offered.
The shortfall forced Republicans to search for extra revenue to fully fund the bill. The Senate hit on a great idea: cutting $16.3 billion from a 102-year-old risk-free giveaway to banks.
Member banks, in exchange for access to the Federal Reserve’s payment services and borrowing facilities, must purchase stock in the regional Fed banks. That stock cannot lose value or be sold — and it carries a 6 percent dividend. The stock operates like a membership fee, only it’s not a fee: The member banks get all of their money back within 17 years and then start earning profit on it. Most of the dividends are exempt from taxes. And nationally chartered banks have to join the Fed by law anyway, while all banks must conform to the rules of membership, so offering a dividend to give them an incentive to join the Fed — the original purpose of the scheme — has no relevance today.
Fed Chair Janet Yellen, the banking industry and its minions in Congress attacked this dividend cut, but it covered such a big chunk of the shortfall — in the Senate’s bill, it paid for one-third of it — that it appeared banks would lose their subsidy. But at the last minute, Republicans Randy Neugebauer of Texas and Bill Huizenga of Michigan devised a way to save it, by amending the bill to instead liquidate something called the Federal Reserve capital surplus account.
It’s also a massive budgetary gimmick. The Fed already remits earnings from its balance sheet to the Treasury Department annually. This liquidation — with the Fed selling off interest-bearing assets — would reduce future earnings, just like cashing out your savings account eliminates future interest gained. But because Fed remittances aren’t on budget, it appears like it raises money. A 2002 Government Accountability Office report explains that reducing the capital surplus account creates phantom revenue for budget accounting, but would “not produce new resources for the federal government as a whole.”
The financial industry’s main argument against the measures it didn’t like was that sources of funding unrelated to our roads shouldn’t be spent on the highway bill, but that’s exactly what Congress did with the Fed’s capital surplus account. I guess it’s okay as long as big banks benefit.
Mind you, the House didn’t touch the other revenue-raisers in the bill, including a preposterous provision to force the IRS to hire private debt collectors to go after back taxes, something that has lost money every time it’s been tried. Only two so-called “pay-fors” were replaced: the big bank subsidy, and a measure extending fees charged by Fannie Mae and Freddie Mac to guarantee mortgages. Banks hated that one as well, because they don’t want to pay out of their mortgage profits.
Just in case you haven’t figured it out yet, these RINOs are total frauds.
Let’s make it plain, then: The hard-right conservatives committed to fighting “crony capitalism” all bailed out the banks by preserving their profits.
And of course, the most crony item of all was also saved, naturally…
The bill also re-authorizes the Export-Import Bank, which facilitates corporate exports with foreign countries. Goldman Sachs, which has recently delved into co-owning commercial enterprises that benefit from Ex-Im funding, heavily lobbied for re-authorization.
Goldman, you know, the “Too Big to Jail and Fail” bank recently caught scamming profits from a plan to help preschool kids in Utah.
And that’s not all for Wall Street. While Republicans ultimately declined to pursue the most far-reaching deregulatory measures they had lined up for the bill, they did pass an amendment from House Financial Services Committee Chairman Jeb Hensarling. This amendment packaged 15 separate bills, many of which have already passed the House previously but might not have gotten through the Senate.
Hensarling describes these as “technical changes.” But as Americans for Financial Reform point out, some go much further. The “SBIC Advisers Relief Act” would pre-empt states from regulating companies that invest in and advise small businesses. It would also allow private equity firms to grow their balance sheets above established limits that trigger additional oversight. The “Improving Access to Capital for Emerging Growth Companies Act” would allow such companies to omit disclosure of their financial dealings to investors. It would also let big banks stop telling their customers about the sharing of their financial data with other companies, weakening privacy protections.
AFR’s biggest complaint is that the Christmas tree mentality will just go on, established by Speaker Ryan through this precedent.
It truly never ends. Of course, this whole thing was entirely predictable, if you did any research at all into who Paul Ryan really is. Here are a few reminders:
Paul Ryan Channels Pelosi on the TPP – You Have to Pass Obamatrade to See What’s in Obamatrade
In Liberty,
Michael Krieger
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he is the worst and he is now more important. he is the worst because he is bought and paid for by the oligarchy.
it’s amazing how stupid the people are who vote him in. whoever unseats this guy from congress deserves a medal.
you should write about niel kashkari being a fraud. he was a horrible transparent liar in the california election. he is the essence of a liar working as a goldman squid tentacle.
it’s time matt taibbi write him up. he tweeted against krugman’s idiocy some inane lie about inequality. so now these assholes want to pretend they’re helping .
will neil kashkari come out against paul ryans’ nixing the dividend cut to his former boss goldman now that he is fed prez?
i don’t think so.