WASHINGTON -- Republican Senator Scott Brown, whose backing is seen as crucial to passage of an overhaul of Wall Street rules, withheld his support of the latest bill today, saying he was upset about the last-minute addition of $19 billion in new taxes on big banks.
While not expressing opposition, Brown’s cool response could complicate efforts to pass the biggest change to the nation’s financial laws since the Great Depression.
Brown’s vote was crucial to Democrats’ ability to win passage of an earlier version of the bill in the Senate. A number of changes have been made in the legislation to win his support.
But Brown objected today to the addition of $19 billion in fees on banks, which pay the expenses of greater oversight duties by a variety of federal agencies for 10 years. The fees would be levied over five years. The fees were added by House-Senate Conference Committee members, led by Representative Barney Frank, during an all-night session Thursday and Friday.
"I was surprised and extremely disappointed to hear that…new assessments and fees were added in the wee hours of the morning by the conference committee,” Brown said in a statement to the Globe this afternoon.
Brown said that while he was still reviewing details, he feared that the costs would be passed along to consumers during a shaky economic time.
Three other key Republicans also did not immediately sign on to the conference committee’s bill today, adding more uncertainty to its prospects in a divided Senate where Democrats have little room for error.
Earlier yesterday, President Obama predicted ultimate victory.
“You bet,” Obama said, when asked whether he could get the bill through the Senate. “We are poised to pass the toughest financial reform since the ones we created in the aftermath of the Great Depression,” President Obama said this morning before departing for the G20 summit in Toronto. “The reforms making their way through Congress will hold Wall Street accountable so we can help prevent another financial crisis like the one that we’re still recovering from.”
The $19 billion in fees would be assessed on banks with assets of more than $50 billion and hedge funds of more than $10 billion. Their fees would vary, depending on how risky the institution is.
The new law is expected to cost $19 billion for various items, such as setting up new bureaus and adding new regulators, according to an estimate by the Congressional Budget Office on June 9.
Republicans have generally argued against new taxes, although defending the largest financial institutions from new taxes at a time when there is populist frustration with Wall Street greed could be politically risky, Frank said yesterday in an interview.
“It will amount each year to less than their bonus pool,” Frank said shortly before the bill passed. “That’s my metric.”
He continued defending the fund this afternoon in an interview, before Brown released his statement.
“It’s a fairly small amount, it’s only for five years,” Frank said. “And it’s probably smaller than their bonus pool for their top executives.”
Frank said some of the large Massachusetts institutions would likely not face large fee increases, since their operations are generally focused on mutual and insurance funds, rather than the risky practices on Wall Street.
Officials from Boston-based State Street Corp., and Springfield-based MassMutual, were generally supportive of the new bill but declined to comment specifically on the fee proposal.
Brown’s criticism comes after he won key concessions to limit the impact that the regulations would have on Massachusetts institutions.
For weeks, Brown had been focused on changes to the so-called Volcker rule, named after former Federal Reserve chairman Paul Volcker, an economic adviser to Obama who proposed the plan. The rule is designed to limit the ability of large banking institutions to speculate with its own money.
Brown sought to exempt altogether financial institutions that use banks for limited purposes, such as MassMutual and its insurance business or Fidelity Investments and its investment funds.
He also wanted to let firms invest a limited amount of their top capital in hedge funds and private equity funds. Brown initially called for a 5 percent cap, but negotiators settled on 3 percent. Those changes were backed by Boston-based State Street Corp. and Bank of New York Mellon Corp., which has several thousand Massachusetts employees.
Ultimately, in the early hours of the morning, the changes Brown sought were made.
“This is a better bill than I thought possible,” Frank said in an interview this afternoon. “I feel good about the substance…We saw that once public opinion focused, it got better.”
“We didn’t get everything,” he added. “But we’re getting most of it.”
About Political Intelligence
Glen Johnson is Politics Editor at boston.com and lead blogger for "Political Intelligence." He moved to Massachusetts in the fourth grade, and has covered local, state, and national politics for over 25 years. E-mail him at firstname.lastname@example.org. Follow him on Twitter @globeglen.