Remember that under the financial rescue program the government injected capital in banks to shore up their balance sheets in exchange for preferred shares. Banks were required to pay back the taxpayer annual dividends on those preferred shares—yields of 5 percent for the first five years, followed by 9 percent per year until the capital is repaid.
And banks have been dutifully paying the government their dividends on a quarterly basis. So far, the U.S. Treasury has reported receiving more than $4 billion in dividend payments from banks.
Legislation introduced by Frank (HR 3068) would take those dividends—originally promised as a return on the taxpayer's rescue of the financial system—and spend it on what are proving to be inefficient and ineffective foreclosure relief efforts.
After all, for a congressman, the only thing better than spending tax dollars once is to spend them twice.
The problem for Frank is that taxpayers were told that the return on their investment would accrue back to them, not to congressional spenders. The goal of paying back the taxpayer was a critical feature of the financial rescue legislation—in fact, the Emergency Economic Stabilization Act requires the Secretary of the Treasury to present a plan to recoup the government's investment after five years if the capital hasn't been repaid.