The Senate Banking Committee has added a new fee on big financial institutions to its legislative package of financial reforms, according to a source familiar with negotiations
The fee could generate as much as $50 billion to cover the costs of dealing with the collapse of so-called too-big-to-fail financial firms, rather than having taxpayers foot the bill, as was the case with the rescue packages of AIG and other big firms.
Though $50 billion is the current number on the table, it could be reduced to $20 billion, the source said
The House's version of the bill, passed late last year, calls for $150 billion in fees.
The fees would apply to only the biggest firms and would be closely tied to new regulatory authority covering the resolution, or wind down, of a firm's operations, if its failure were deemed to pose a threat to the overall financial system.
It's unclear on what basis—such as a percentage of assets or insured government deposits—the fees would be assessed.
The bank fee is the latest measure to be addressed by Senate negotiators led by committee chairman Chris Dodd (D-Conn.) and Bob Corker (R-Tenn.), who have working together on a bipartisan package for more than a month.
Earlier this week, negotiators agreed on a new regulatory structure for the supervision of banks, according to sources.
Under the plan, two current regulators, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, would be merged into one entity, as is the case with the House bill.
The Federal Reserve would overesee only the nation's two dozen biggest banks, basically those with assets over $100 billion. Any banks thought to be a systemic risk would also be handled by the Fed.
The FDIC would have responsibility for state-chartered banks.
Government and industry sources say a draft of the bill could be made public as early as Friday, but next week is more likely. Aides to Dodd and Corker would not comment on a timeline.
Dodd spokeswoman Kirstin Brost said, "We are making progress but nothing's decided until everything's decided."
"We're still working, but we're not there yet," said Corker press secretary Laura Herzog.
Negotiators have been struggling to come up with what they consider bipartisan legislation, but have remained optimistic about the chances, despite significant differences in many areas.
On key sticking point has been the creation of a consumer financial protection agency. Democrats want a powerful, independent agency with a presidential appointee, as well as rule-making, administrative and enforcement authority.
The GOP wants an agency with far less authority, saying its goals and actions could clash with other regulators and potentially threaten the safety and soundness of the financial system.
An agreement on derivatives supervision has also been elusive; it may not be included in the draft legislation and would instead be handled as an amendment later on in the legislative process.
Where negotiators stand on the so-called Volcker rule is also unclear. The proposal, which has been pushed by the White House—would bar Wall Street firms from proprietary trading and cap the amount of insured government deposits firms could hold. At one point, the Senate panel had decided to delegate that authority to regulators rather than have it legislated by Congress.
Other key components—such as resolution authority and the creation of a systemic risk council—are thought to have been largely worked out.
Any committee bill would have to pass the full Senate, where a close vote is expected, and then be reconciled with the House version.
Financial reform—always among President Obama's top legislative priorities—has assumed even greater importance since health care reform stalled.