Bankers Oppose IRS Regulation Of Foreign Investments

By Andrea Salazar

Representatives from financial institutions in Texas and Florida fear loss of investments if the IRS moves ahead with a proposed regulation requiring banks to report the deposit interest paid to foreign investors.

The Financial Institutions and Consumer Credit Subcommittee held a hearing on the recent IRS proposal. Currently, banks do not report the interest foreign investors earn from American banks, nor do foreign investors pay federal taxes on that interest.

At the hearing, Rep. Bill  Posey (R-FL) emphasized that the policy is not necessary to enforce U.S. tax laws and will harm the economy instead.

“Make no mistake about it, the proposed regulation will drive hundreds of billions of dollars out of America, and cause irreparable harm to an already fragile U.S. economy,” Posey said in a statement.

Alex Sanchez, president and CEO of the Florida Bankers Association, emphasized the threat the IRS regulation would impose on foreign investors from South America, whom he says are the majority of investors.

“People do not trust their institutions in their home countries,” Sanchez told the subcommittee. “They’re worried about an economic collapse where their currency will be worthless. That’s why they have their monies in the United States of America.” 

However, Rebecca Wilkins, senior counsel on Federal tax policy for Citizens for Tax Justice, supports the IRS measure as a way to curb tax evasion.

“We do not believe that the United States should be a tax haven for citizens of other countries who wish to evade their tax obligations to their home country,” Wilkins said in her testimony.

Posey, along with Rep. Gregory Meeks (D-N.Y.) have introduced legislation to block the IRS from forcing banks to release the deposit interest information of foreign investors. They also sent letters, with bipartisan support, to President Obama and Treasury Secretary Timothy Geithner asking them to withdraw the proposed regulation.

Wall Street Bill Will Receive Bipartisan Backing, Predict Democrats

By Laurel Brishel Prichard
University of New Mexico/Talk Radio News Service

Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.) predicted on Wednesday that Republicans that are retiring or up for re-election later this year will soon be changing their stances on Wall Street reform.

"We would love to see some bipartisanship on this bill," said Brown. "I think we will see it."

Brown added that certain Republicans are already beginning to change their minds about the legislation. As evidence, he cited the decision by Sen. Chuck Grassley (R-Iowa), who faces re-election this fall, to vote with Democrats in the Senate Agriculture Committee on a derivatives regulation bill.

"If you look at a list of what Republicans are up for re-election in 2010 you might correspond to bet who ends up voting procedurally to get this bill moving," said Brown.

Dodd Confident Senate Will Make Progress On Financial Reform This Week

By Laurel Brishel Prichard University of New Mexico/ Talk Radio News Service

Senate Banking Committee Chairman Christopher Dodd (D-Conn.) expressed confidence Monday that the Senate will make headway on financial regulatory reform this week, despite mounting challenges from Republicans.

“I'm going to work on the assumption … that when we bring this bill up later this week that we'll have the votes across the board...to allow us to debate this legislation, consider amendments and move forward," said Dodd during a morning press conference.

Dodd added that if Republicans have suggestions for a better strategy toward reforming regulation of the financial industry, then they need to come forward soon. Otherwise, the effort to move forward with the legislation will continue.

“The door has been open … it’s never been closed. My Republican colleagues on the committee and leadership know that,” Dodd explained. “But I’m waiting for the knock on the door.”

The legislation would put a $50 billion fund in place that “too big to fail” banks would pay into in order to ensure that they would receive assistance if they ever came into hardship. According to Dodd, the idea for the program, similar to what smaller banks do with the Federal Deposit Insurance Corporation, came from the Republicans, so their recent opposition was not foreseen.

“This was a Republican suggestion to have a pre-payment in the bill,” said Dodd. “I’m willing to listen to some other ideas, provided we don’t expose the taxpayer [to risk.]”

According to the chairman, reform legislation would have prevented Goldman Sachs Group Inc. from committing fraud, as alleged recently by the Securities Exchange Commission.

“Our bill would have prevented those kinds of events from happening,” said Dodd.

Student Loan Reform Proposal Is Real "Game-Changer," Says Education Secretary

By Laurel Brishel Prichard - University of New Mexico/Talk Radio News Service

Secretary of Education Arne Duncan gave hope to current and future college students Wednesday, saying the Obama administration wants to increase funding for federal student loans as well as prevent banks from profiting from individuals enrolled in universities.

"Americans want to invest in their children and their future. Not in profit for banks," said Duncan.

Under a proposal recently put forth by the administration, banks would stop receiving federal tax subsidies, and students would go directly to the government for their school loans. The proposal would also reward students with capped interest rates, which would drop from 15 percent to 10 percent. In addition, students would see their loans be forgiven after 20 years, five years less then the current time period in place, and graduates that work in the public sector working in rural or inner city communities after they finish school would have their loans erased after 10 years.

"This is a once in a generation opportunity," said Duncan.

The estimated savings under the proposal would amount to nearly $87 billion over the next 10 years, according to Duncan. Those savings would be put toward more education programs and additional funding for Pell grants, which provide funding to low-income students.

"We have to get many more people into college today and it's never been more difficult for families to overcome that financial hurdle. We have a chance to fundamentally break through. This is a real game-changer," said Duncan.

Proposed Financial Regulatory Agency Will Protect Consumers, Claims Treasury Official

Leah Valencia, University of New Mexico-Talk Radio News Service

U.S. Treasury Department Director for Consumer Protection Peggy Twohig said that establishing a far reaching financial regulatory agency could create a system of checks and balances for financial institutions, thus ensuring the strength of the U.S. economy.

“An agency would create uniform protection for consumers and make a level playing field for all types of financial services,” she said.

While discussing the Obama administration’s proposed Consumer Financial Protection Agency at the New American Foundation Friday, Twohig said it is necessary for all financial institutions to learn a sense of responsibility for the consumer by following base regulations

“The administration has supported that,” she said. “Part of the legislative proposal is for federal rules to be a floor not a ceiling that would apply to everyone.”

Twohig said there was not acceptable oversight of banking sectors in the past, adding that this caused a race to the bottom, where nonbank lenders offering aggressive products often steered consumers to unacceptable loans. As a result, banks who wanted to compete felt pressured and began to loan irresponsibly. Twohig said the proposed agency will prevent such an occurrence in the future.

“We need basic standards that will protect all consumers,” she said. “This will help the responsible players... who want to offer straightforward transparent products for consumers.”