Shelby Aims To Permanently Extend Tax Cuts

Sen. Richard Shelby (R-Ala.) said today that he’ll help sponsor legislation aimed at making permanent a series of tax cuts passed in 2001 and 2003.

“The only thing worse than raising taxes is doing so under difficult economic conditions, as President Obama proposes,” said Shelby in a statement. “Allowing our existing tax rates to expire will cause the largest tax increase in America’s history, which is why I strongly support this legislation to prevent it.”

In addition to freezing current income tax rates, Shelby’s legislation would prohibit tax hikes on dividends earnings and capital gains. It would also increase the Alternative Minimum Tax (AMT) exemption amount so that fewer families are subject to it.

You can read more about the Tax Hike Prevention Act of 2010, or S. 3773, by clicking here.

Measure To Reform Fannie And Freddie Fails

A trio of Senate Republicans failed in their quest to put an end to the days of taxpayer bailouts for Fannie Mae and Freddie Mac.

The GSE (Government Sponsored Enterprise) Bailout Elimination and Taxpayer Protection Amendment, sponsored by Sens. John McCain (R-Ariz.), Richard Shelby (R-Ala.) and Judd Gregg (R-N.H.), would have forced the government to relinquish control of the two government-backed mortgage giants within two years.

Recently, Fannie Mae, which lost $13.1 billion during the first quarter of this year, asked the government for an additional $8.4 billion to stay afloat. Similarly, Freddie Mac asked the government for $10.6 billion in funds after reporting a loss of $8 billion for the quarter. Combined, the two companies have borrowed $145 billion from the Treasury Department since the government took complete ownership of them during the heart of the nation’s financial collapse in 2008.

"We are not saying that Freddie and Fannie have to go out of business. We're saying we want them to be a business that is on a level playing field with other private sector competitors," said McCain to reporters today, hours before his amendment went down in a 56-43 vote.

Though most Republicans supported the item, it had its fair share of skeptics.

First, critics, including many Democrats in Congress, believed the measure would unwind Fannie and Freddie so quickly that it would create chaos throughout the entire housing market. House Financial Services Committee Chairman Barney Frank (D-Mass.), who has said he supports reforming the two GSE’s, called the amendment a huge gamble.

“Simply to abolish Fannie and Freddie...and not do anything to replace the functions they are now performing with a conservatorship, would be a disaster for housing, and therefore for the economy as a whole,” he said last week.

Furthermore, the liberal Center for American Progress recently referred to the legislation as “The Credit Crunch Restoration Act of 2010,” arguing that by abolishing a large chunk of the mortgage backing industry, millions of Americans would lose access to credit.

Time To Act On Financial Reform Is Now, Says Dodd

Citing the urgent need to repair the nation’s ailing financial system, Sen. Chris Dodd (D-Conn.) unveiled his own financial regulatory reform plan on Monday.

Dodd, who presides over the powerful Senate Banking Committee, said although a package he had been working on with fellow committee members Richard Shelby (R-Ala.) and Bob Corker (R-Tenn.) was close to being finished, he decided he could no longer wait for them to help put forth legislation.

“Nearly seven million have lost their homes to foreclosure over the last several years. Millions more have lost their retirement funds or their small businesses...Americans are frustrated...and they wonder if anyone is looking out for them...It is certainly time to act.”

In an attempt to prevent future collapses of both the housing and credit markets, Dodd’s plan would do four main things: First, it would abolish the belief that certain banks and financial institutions are “too large to fail,” ensuring that taxpayers would not again be asked to help bail out firms that fall into trouble. Next, it would create a new independent consumer protection agency (CFPA) to serve as a watchdog over various financial products, and would also establish a council tasked with identifying threats to the nation’s economic stability. Finally, it would increase the transparency by which complex financial tools such as hedge funds and derivatives are regulated.

“The legislation I’m offering is comprehensive in its scope because the crisis it aims to solve is comprehensive in its scope,” Dodd said.

While the plan has bipartisan agreement on several of its provisions, Dodd acknowledged that it currently lacks bipartisan support. Additionally, Dodd hesitated to say that the plan would even receive the blessing of every Democrat on the committee.

There are a few reasons for this. First, lawmakers and outside experts are skeptical over whether housing the CFPA inside the Federal Reserve (Fed) is a good idea. Those skeptics argue that the Fed contributed largely to the economic decline, and thus should not be given increased authority. During his press conference however, Dodd insisted that the CFPA would be an independent body, under no command of the Fed.

Another area of concern for some is that smaller-to-medium-sized banks would be needlessly subjected to tightened regulation under the legislation. But Dodd assured that firms with assets valued at under $10 billion would be excluded from increased oversight.

“We must restore confidence and optimism in our economy, accountability in our markets and stability to our middle class,” he said.

The hardest part for Dodd will now, of course, be getting the votes necessary to pass his plan. With the debate over health reform having renewed an atmosphere of partisanship in Washington, Dodd’s legislation will probably be viewed as too politically risky by moderates and conservatives who face re-election this year. Yet on Monday, Dodd -- who has announced he will not be running for another term in office -- viewed the prospects of passage with an almost defiant sense of confidence.

“We will have financial reform adopted this year in the Congress of the United States.”