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Dems Drop Bank Tax for Republican Votes on Financial Reform

July 1, 2010 - by Hilary Worden

In their attempt to wrangle enough Republican votes to pass the financial reform bill, Democrats have dropped a $19 billion tax on big banks and hedge funds. Senator Scott Brown [R-MA] in particular raised objections to this provision, believing that the cost would be passed on to customers.

Before the tax was added to the bill, the Congressional Budget Office estimated that the costs of implementing the bill would most likely be about $19 billion more than the revenue it would raise. The tax was added by Representative Barney Frank [D-MA] to cover this difference, and ensure that banks helped pay for regulation. The tax would have been imposed on “financial companies” with more than $50 billion in total assets, and “financial companies that manage hedge funds with $10 billion or more of assets under management.”

Now that the new tax is out, the $19 billion will be covered mainly by ending TARP earlier, which is expected to save $11 billion. Also, FDIC fees will be increased for banks with over $10 billion in assets, which is expected to raise around $5.7 billion.

The House passed the conference report yesterday, but the Senate is not expected to vote on it for at least a couple of weeks. Although Senator Brown has yet to commit to voting again for the bill, Senator Susan Collins [R-ME] has said she will now support it. Democrats may also be hoping for the support of Senator Olympia Snowe [R-ME], who helped get the bill past 60 votes in May, and Senator Chuck Grassley [R-IA].

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