It seems that some in Congress have finally decided to do something about part of our crumbling infrastructure, specifically, fixing our highways. They even have an idea for how to fund it without raising taxes – cut the subsidies currently going to Wall Street. Wall Street, of course, is not happy about this proposal even existing.
Wall Street banks currently receive an annual dividend of 6 percent from the Federal Reserve, according to Bloomberg. The dividend is less than $350 million for the four biggest banks, which are J.P. Morgan Chase, Bank of America, Citibank and Wells Fargo. They aren’t worried that losing the dividend will break them. They’re worried that once Congress taps their “due” funding, they won’t be able to stop.
Lest you think that Democrats are entirely behind this, Bloomberg reports that Senate Majority Leader Mitch McConnell told these banks that he wouldn’t remove the provision of the highway funding bill that reduces that dividend to 1.5 percent. This would apply to banks with more than $1 billion in assets, which tend to be the banks that like to hurt we little people the most.
It’s about time Congress showed Wall Street that they can’t run roughshod over us while raking in obscene profits that don’t add much value to society. While the dividend is only a very small piece of their bottom lines, it’s a move that will likely hurt them, and one that Congress may actually pass without loopholes, or watering down. Wall Street does not like being reined in, and is working feverishly to try and stop this.
Besides that, there’s more to this dividend than we’re probably aware. Wall Street on Parade reports that the dividend is more than 100 years old, and:
If the bank had a hand in crashing the economy twice in the past century, say in 1929 and again in 2008 – like JPMorgan and Citigroup – it gets an extra bonus: its 6 percent dividend is tax-exempt. That’s because the statutes say that if the bank’s shares in the Fed were acquired prior to March 28, 1942 the bank doesn’t have to pay corporate taxes on it. JPMorgan’s roots reach into the eighteenth century while Citibank, part of Citigroup, traces its founding to the City Bank of New York in 1812. CEOs of both banks were shamed before Congress in the 1930s for their role in the crash of ’29 and again following the 2008 Wall Street crash.
The banks don’t seem to care about getting shamed, though, so long as such shaming doesn’t eat into their profits much. They just want their money. All the money they can get their grubby paws on. Wall Street on Parade went on to quote the American Bankers’ Association’s position on cutting the dividend:
We strongly urge you to oppose this proposal. As Senate Banking Chairman Richard Shelby has pointed out, there is absolutely no connection between the Federal Reserve System and the funding for the Highway bill. Furthermore, during testimony before the Senate Banking Committee on July 16th, Federal Reserve Chair Janet Yellen stated: ‘I would say that this is a change to the law that could conceivably have unintended consequences and I think it deserves serious thought and analysis.’
That last part is true of any proposal, and hopefully, Congress is busy with such thought and analysis. What’s frightening is that the “unintended consequences” could come because of subtle retaliation, rather than legitimate, unforeseen problems.
We shouldn’t rule out the possibility that these institutions will want to prove that cutting the dividend was a bad idea by rigging certain consequences. They still have enough power and influence over our economy, and our lawmakers, to pull a stunt like that, and we already know we can’t trust them.
The big banks are multi-billion dollar corporations that don’t need government subsidies. We do, however, need funding for our highways and other infrastructure projects. It’s past time to stop subsidizing highly profitable corporations, and putting that money where it’s actually needed.
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