In the early morning hours on Thursday during negotiations over the House transportation bill, Rep. Neugebauer presented a fairly surprising amendment that tapped billions from a to-date unmentioned Federal Reserve surplus account to help cover the cost of the bill.
Details are still a little uncertain about exactly how much money will eventually be transferred from this account — House leadership could hang on to some of the money for some other need and choose to only fund three years of their transportation bill — we’ll be keeping a close eye on how that develops. But we do know that the House now has as much as $85 billion in new general fund revenues to cover the gap between what the gas tax brings in and current levels of transportation spending.
From his speech, even Rep. Neugebauer (R-TX) agrees with our assertion that we shouldn’t be filling the trust fund with non-transportation revenue sources (i.e., general taxpayer funds). So what was the reasoning for tapping this Federal Reserve fund in this amendment? One reason was to eliminate one of the Senate’s funding sources that many did not like. Here’s the speech that Rep. Neugebauer gave on the floor in the early morning hours of Thursday when most of us were all fast asleep.
First, I don’t think it’s good policy to fund transportation from other sectors of the economy.
This amendment does seek to address two major issues in the budget offsets sent over from the Senate: the Federal Reserve dividend reduction and the ‘G-fee’ increase. Moving forward with the Federal Reserve dividend reduction without studying it could have a devastating consequence for the supervision of the financial sector and the stability of the Federal Reserve system. The cost that banks, especially community banks, could face as a result of the dividend reduction would be passed on to hard working consumers. At a time when many Americans continue to struggle from the unintended consequences of Dodd-Frank it would dangerous and irresponsible to move forward with the Senate version.
Second, this amendment addresses what I see as a further entrenchment of Fannie Mae and Freddie Mac. This is particularly timely because just this week we learned that Freddie and Fannie may need to tap the Treasury once again and saddle the taxpayers with the bill. This amendment further protects the taxpayers. Allowing Congress to continue to raise g-fees will make comprehensive housing financial reform impossible.
Our amendment addresses both problems by liquidating and dissolving the Federal Reserve Capital Surplus Account. The Federal Reserve Capital Surplus Account currently has about $29 billion in capital surplus. This Account is made up of the earnings that the Federal Reserve has retained from investing member banks money. Let me say that again. The Surplus Account is made up of the earning that the Federal Reserve has made from investing member banks money. The Federal Reserve continues to hold this account in surplus at a time that our nation has over $18.5 trillion in debt.
This is not a perfect policy but it’s better than the alternative. This preserves the budget neutrality of the transportation bill and counters irresponsible proposals sent over to us by the Senate. Further, it protects consumers from the potential for cost increases while reforming the Surplus Account to meet the needs of the current fiscal crisis. When the Surplus Account was created no one could have imagined the debt and deficits that we are facing. It is appropriate to liquidate this account to meet these days’ realities.
“Moving forward, I hope that this body will ensure that transportation funding comes from transportation users and not completely unrelated sectors of the economy.