Magazine article American Banker

Banks Left Hanging by Budget Impasse

Magazine article American Banker

Banks Left Hanging by Budget Impasse

Article excerpt

The battle over the budget may be a matter of presidential politics, but the day-to-day concerns of the banking industry are caught in the middle.

On one hand, this week's news that a balanced-budget bill could be delayed until after the November election should cheer the industry. That's because the bill would require banks to pay as much as $600 million a year to help finance the thrift bailout.

"It's a gift to the banking industry," said one congressional aide closely involved with the legislation. Even if banks eventually end up paying for the Financing Corp., or Fico, bonds that were sold to shore up the thrift insurance fund, the total tab gets smaller with the passage of time, he said.

Moreover, the banking committee is unlikely to move the Fico provision separately from the budget. It's part of a provision that raises money to capitalize the Savings Association Insurance Fund, and that money counts for budget-balancing purposes.

If it were moved separately, the committee would have to come up with other cuts to achieve its share of the budget savings.

But the fact is that the budget stalemate is, at best, a mixed blessing for the banking industry. Sooner or later - probably sooner - the White House and Congress will agree on a budget bill and most bank lobbyists are resigned to the prospect of paying for Fico eventually.

In addition, the budget bill provides long-sought relief on trust fund conversions, Individual Retirement Accounts, and capital gains taxes that financial institutions have been seeking for years.

"It's mixed news for banks," said Edward L. …

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