Legislative Update

American Banker, May 13, 2004 | Go to article overview

Legislative Update


ACTION ON LEGISLATION

GSEs

S 1656, HR 2575

Most lawmakers do not expect further action this year on a bill that would create a stand-alone regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan banks.

Sen. Wayne Allard, R-Colo., said Monday that it is more likely passage "will be in the next Congress, if anything happens at all" but stressed that the matter remains a priority. Sen. Allard said he expects the Senate Banking Committee to hold more hearings on the issue this year, "particularly on the matter of receivership" of the government-sponsored enterprises in a financial crisis.

That issue was one of the reasons Senate Banking Committee Chairman Richard Shelby's bill failed to gain much bipartisan support, passing April 1 on a 12-to-9 vote. The original bill would have allowed a new regulator to put a GSE into receivership. The provision was amended to give Congress 30 days to object to a receivership decision under an expedited legislative process.

That amendment, by Sen. Robert Bennett, R-Utah, was enough to force the Bush administration to oppose the bill. Treasury Secretary John Snow and Department of Housing and Urban Development Secretary Alfonso Jackson said April 2 that the provision reinforced the idea that the GSEs are backed by the federal government.

The administration has continued to beat the reform drum, however. HUD has proposed tough new affordable-housing goals for Fannie and Freddie and is scrutinizing certain activities, including Fannie's international consulting business, to see whether they fall outside the GSE charter.

On May 12, Treasury Assistant Secretary for Financial Institutions Wayne Abernathy reiterated that the agency was considering limiting the GSEs' debt issuances.

Most observers say that only a GSE crisis could lead to enactment this year.

The bill from Sen. Shelby, R-Ala., would let the regulator raise minimum and risk-based capital requirements, and oversee the safety and soundness and the housing mission of the GSEs.

The agency would be run by an executive director, who would be chosen by the President and approved by the Senate for a six-year term. The executive director would be advised by a board including the Treasury secretary, the secretary of the Department of Housing and Urban Development, and the chairman of the Securities and Exchange Commission.

The House is unlikely to take up the Shelby bill anytime soon. House Financial Services Committee Chairman Michael G. Oxley failed in his efforts to craft a bill last year. His proposed legislation was also opposed by the Bush administration.

FSC/ETI tax break repeal

S 1637, HR 2896

The Senate on Tuesday voted 92 to 5 to approve a sweeping corporate tax bill that would do away with ex-port and de-preciation breaks that banks have long enjoyed.

The so-called Jobs bill (for Jumpstart Our Business Strength), sponsored by Finance Committee Chairman Charles Grassley, R-Iowa, would repeal the "foreign sales corporations" and "extraterritorial income exclusions" tax breaks the World Trade Organization had ruled illegal export subsidies. Banks earned the credit by buying American-built aircraft and other equipment and leasing it to foreign operators.

The bill would grandfather leases signed by Sept. 17, 2003, despite European Union objections to the idea. It also would set up a new tax-advantaged system so that U.S. companies could continue leasing the equipment overseas by setting up offshore leasing arms.

The tax bill would also do away with a controversial depreciation deduction banks and other companies earned by buying used subway cars, sewer systems, and other utilities and leasing them back to the original owner.

A similar bill cleared the House Ways and Means Committee on Oct. 28 by a vote of 24 to 15. Panel Chairman Bill Thomas, R-Calif. …

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