Oklahoma Bankers Rally Against Senate Transportation Bill
Financial institutions are uniting against the U.S. Senate’s six-year transportation bill, including bankers in Oklahoma.
Banks are required to buy stocks from the Federal Reserve in order to become members. They receive a six percent interest rate on their investment. The transportation bill would reduce that rate to one-and-a-half percent. The change offsets about $16 billion of highway spending.
Oklahoma Bankers Association president and CEO Roger Beverage said that would hurt consumers.
“Banks are going to continue to make money, no question about that,” Beverage said. “But this particular deal means they’re going to have less money to lend to people and those are the real people that get blindsided by something like this.”
The interest rate cut would apply to banks with over one billion dollars in assets. Beverage estimates it would affect about 10 banks in Oklahoma.
Beverage is concerned that there haven’t been studies about the effect of cutting the rate.
“Once that question is answered, hey knock yourself out, depending on what the answer is. But to go ahead and propose this and put it into law without even investigating what it might mean to Oklahoma consumers is nonsense,” Beverage said.
The Senate will likely take up the long-term bill this week, but the House won’t consider it until the fall. Both the House and Senate are moving towards passage of a short-term three month bill this week before an important deadline this Friday, after which the Department of Transportation would not be able to process transportation aid payments to states.
Members of the American Banking Association and other financial institutions sent a letter to Republican Oklahoma U.S. Senator Jim Inhofe and Democratic California Senator Barbara Boxer on July 16 to express their opposition to the Senate transportation plan. The letter took issue with decreasing the interest rate on Federal Reserve stock because banks are prohibited from selling, transferring or using the shares as collateral. ABA leadership said that money would otherwise be used for lending.
“This proposed policy change undermines a key agreement that has underpinned the United States banking system for 100 years. Dramatically reducing the rate to pay for a completely unrelated congressional priority will weaken the financial stability of banking institutions and reduce liquidity available in the financial system,” the ABA wrote in the letter.
The Wall Street Journal reported on July 21 that the proposal wouldn’t be a “major hit to any one bank,” but would decrease annual profits by about 4 percent annually.
“Proposals to ding banks as a way to offset spending aren’t new. The banking industry lobbied furiously last year against a budget bill from then Rep. Dave Camp (R., Mich.), who proposed a new tax on the biggest banks as a way to generate revenue. Although the Camp bill never gained traction, industry executives warned at the time it would set a dangerous precedent and be more likely to emerge in future budget debates.”