A multi-year transportation deal created by Senate Majority Leader Mitch McConnell (R-KY) and Sen. Barbara Boxer (D-CA) has angered the banking industry, reported The Hill. Going against Wall Street isn’t something that Congress usually does.
The deal seeks to offset $16.3 billion of the $50 billion required to fund the transportation budget needed over the next few years. The deal calls for lowering the interest rate of stock dividends that banks purchase at the Federal Reserve from 6 percent to 1.5 percent. This only affects banks that have more than $1 billion in consolidated assets. These banks are not pleased at this knock to their revenue. They argue that lowering the interest rates will damage banks.
“Dramatically reducing the rate to pay for a completely unrelated congressional priority will weaken the financial stability of banking institutions and reduce the liquidity available in the financial system,” stated a letter penned by several industry groups. “This proposed policy change undermines a key agreement that has underpinned the United States banking system for 100 years.”
This is surprising. Congressional members wouldn’t dare dream of hurting their corporate overlords. But this is a modest change and the banks are overreacting. A 4.5 percent reduction isn’t going to cripple Wall Street.