Warren won't let banks escape health care debate

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WASHINGTON — If bankers thought they could hide from the spotlight in the Democratic presidential primary as candidates continue to focus on their health care plans, leave it to Sen. Elizabeth Warren, D-Mass., to prove them wrong.

Warren, who in recent months has consistently been at or near the top of primary polls, plans to make large banks help foot the bill for her “Medicare for all” plan.

“It’s been more than ten years since the 2008 financial crisis, and while a lot of families are still dealing with the aftereffects, the financial sector is making record, eye-popping profits,” Warren wrote in the outline of her health care plan. “Meanwhile, the risk of another financial crisis remains unacceptably high. By imposing targeted taxes and fees on financial firms, we can generate needed revenue and also make our financial system safer and more secure.”

It’s a sign that banks will continue to face scrutiny if Warren is the Democratic nominee, or if she is elected president, as the industry has tried to argue in Washington that it has cleaned up its act after the financial crisis.

Warren’s plan to tax big banks comes after economists suggested in an Oct. 31 letter to the senator that her Medicare-for-all plan would require an additional $20.5 trillion in federal funding between 2020 and 2029.

The economists suggested an annual systemic-risk fee for financial institutions with more than $50 billion of total assets, roughly 40 of the largest U.S. banks, could generate roughly $100 billion in revenue to contribute to a Medicare-for-all plan.

Warren isn’t the only candidate who thinks banks should help pay for expanded health care access. Sen. Bernie Sanders, I-Vt., suggests a fee of seven basis points, or 0.07%, on covered liabilities of financial institutions with $50 billion or more in total assets. That’s a smaller fee than the 0.15% of firms’ covered liabilities that Warren is proposing.

Ed Mills, a policy analyst with Raymond James, notes that Warren's systemic-risk fee would still saddle banks that had benefited from the 2018 regulatory relief law. The legislation removed the hard $50 billion threshold for banks to be considered "systemically important financial institutions." So a number of banks that are not subjected to the SIFI regulatory framework would still face an added fee to offset health care costs.

“It’s not a surprise to me that she put a $50 billion asset threshold, but I think it’s clear that Congress has kind of moved past viewing banks with $50 billion assets as systemically important,” Mills said.

To be sure, the chances of Medicare-for-all moving through Congress are slim, even if Democrats were to gain a Senate majority after the 2020 elections.

Yet even though Washington today has warmed up to tailoring bank regulations, the industry likely won’t be off the hook when a future administration is looking to generate revenue.

Anti-big-bank sentiment among Democrats remains high. Recent scandals at Wells Fargo have harmed the industry's image overall. And Democrats view banks as benefiting from Trump administration polices that they opposed. Progressives now look toward the wealthy beneficiaries of tax reform as potential groups to tax to pay for their proposals.

“If there is anything done on health care, there will be a question on how to pay for it,” Mills said. “The wealthiest in the country and some of the biggest beneficiaries of the Trump tax cuts are very high on the list of potential payers. … Banks were some of the biggest winners.”

Bankshot is American Banker’s column for real-time analysis of today's news.

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Election 2020 SIFIs Tax reform Policymaking Healthcare-related legislation Elizabeth Warren Wells Fargo Bankshot