WASHINGTON – More than a third of House lawmakers expressed concern Tuesday with a controversial plan to help fund a major transportation bill by slashing dividends from the Federal Reserve.
Lawmakers warned in a letter to House leaders that the provision, which is included in the Senate version of the highways legislation, is “premature” and warrants further study. The Senate bill would cut the dividend paid to member banks that are required to own Federal Reserve stock to 1.5% from 6% to help pay for the highways program. The timing of the letter is critical, as the House has not yet taken up the transportation bill or the funding provision.
House Financial Services Committee Chairman Jeb Hensarling, R-Tex., requested in September that the Government Accountability Office study the issue, a move supported by the 103 Republicans and 47 Democrats who signed on to Tuesday’s letter.
“Until GAO completes its work and the congressional committees of jurisdiction have an opportunity to review the significant public policy questions at issue, we believe that changes to the Federal Reserve dividend rates are premature,” the lawmakers wrote, led by Reps. Bill Huizenga, R-Mich., and Bill Foster, D-Ill.
The banking industry has pushed back hard on the proposal, arguing that the change hasn’t been fully vetted and shouldn’t be used to offset unrelated spending.
Meanwhile, Fed Chair Janet Yellen warned in July that the provision could have “unintended consequences” and that the move “deserves some serious thought and analysis.”
A three-month extension of the highway program that passed this summer is set to expire on Oct. 29.