Banks got a big win Thursday, when House lawmakers overwhelmingly agreed to scrap a provision that would have pulled $17 billion worth of dividends the Federal Reserve pays to member banks to help pay for roads.
Member banks are required to purchase stock, which does not gain value and cannot be sold or traded, in the Fed. The Fed has paid member banks a 6% dividend to entice them to participate in the system for more than century. House members voted 354 to 72 to strip a provision in the six-year highway bill that would have reduced the dividend and used the dollars instead to fund transportation projects.
The approved amendment, offered by Reps. Randy Neugebauer (R-Texas) and Bill Huizenga (R-Mich.), would also kill another bank-reviled offset. The second pay-for would have raised highway funds by extending a fee charged by Fannie Mae and Freddie Mac to guarantee mortgages. Major banking groups have repeatedly opposed using those “G fees,” which are meant to protect the housing giants’ books, as a way to raise revenue to cover other policy projects.
Those changes, now part of a six-year highway bill passed by the House Thursday, sets up negotiations with the Senate on its highway bill, which includes both of the bank-opposed amendments. The Senate bill proposes slashing the Fed bank dividend to 1.5%, calling the 6% rate “overly generous.”
House and Senate conferees will be meeting soon to strike a compromise package before highway funding expires on Nov. 20.
