Late last year, Congress passed a law limiting these payouts, using the savings to help pay for a highway bill. While lawmakers originally proposed trimming the subsidy by $17 billion over five years, the legislation ultimately only cost banks $2.7 billion, thanks to a late compromise that allowed smaller banks to keep receiving full payment. Since the subsidies are scaled to the size of each bank, the lion’s share of the $2.7 billion will come from a small number of big firms.
The top lobbyist for the American Bankers Association wrote a letter to the Fed last week calling the subsidy cuts “an unconstitutional taking of member banks’ property without compensation.”
“The government’s actions … amount to a regulatory taking of member banks’ property,” ABA President and CEO Rob Nichols wrote.
You read that correctly. A bank lobbyist argued that banks have a constitutional right to free money from the government.
The bank subsidy is a century-old relic from the earliest days of the Federal Reserve. When the United States established a central bank in 1914, it didn’t require all banks to participate in the new regulatory regime. Instead, Congress encouraged banks to take part by offering to pay a healthy dividend on stock that banks purchased in the new central banking system. This practice eventually became obsolete when Congress granted the Fed blanket power to regulate commercial banks whether they opted into the central banking system or not.
But Congress never got around to ending the subsidy after it changed the regulatory standards.
Read the rest of Zach Carter’s article – Source: Big Banks Just Claimed A Constitutional Right To A Taxpayer Subsidy