Brady Asks for Tax Breaks to Spur Savings
WASHINGTON -- Treasury Secretary Nicholas Brady made a new pitch to Congress on Thursday for savings accounts with favorable tax treatment.
"A key problem is our low national rate of savings, which is caused by both excessive federal deficits and inadequate private savings," Mr. Brady said in an appearance before the House Ways and Means Committee.
Facing a new year that is likely to be heavy on tax issues and light on banking legislation, Mr. Brady urged consideration of Individual Retirement Accounts that would permit penalty-free withdrawals for first-time homebuyers. He also renewed a call for taxfree Family Savings Accounts.
"We need to assist the housing industry and, in particular, encourage first-time homebuyers," he said. Authorizing use of IRA funds for the purchase of a home, be said, would "provide an incentive for more taxpayers to save."
Family Savings Accounts, he added, "would be popular because they would provide a simple tax-free way for people to save for down payments on homes, educational, and medical expenses."
The Ways and Means hearing, held during Congress' month-long adjournment period, was an opening act in next year's debate over economic policy.
At the center of that debate are a number of tax and other issues that are likely to affect the banking industry, including the tax-advantaged accounts.
Bank Issues on Agenda
Appearing with Mr. Brady, Michael J. Boskin, chairman of the president's council of economic advisers, highlighted the importance of bank issues in current economic thinking. He cited the credit crunch as a drag on the economy over the past two years and said he remains concerned about tight credit.
"Because their capital positions have improved greatly, banks are in a better position to lend than they have been for some time," he said. "However, I am still concerned about the low level of bank lending."
Responding to a question, Mr. Brady said the Bush administration is still in discussions with the supervisory agencies, citing a meeting with regulators he attended recently in Georgia and another one on Dec. 16.
Critical of Clarke Rejection
But he said the Senate may have made the problem worse by rejecting Robert L. Clarke's nomination for a new term as comptroller of the currency.
"There's a guy that's done a good job and the Senate turns him down," Mr. Brady said. "What kind of message does that send to the regulatory community?"
Mr. Boskin also called for renewed efforts to overhaul the financial services industry.
"These reforms are needed to rebuild the soundness of the banking industry and enable it to be internationally competitive," Mr. Boskin said.