CBA Letter of Support for HR 5027

April 28, 2016

 

The Honorable Randy Neugebauer

Chairman, Financial Institutions and Consumer Credit Subcommittee

Committee on Financial Services

U.S. House of Representatives

Washington, D.C. 20515

 

Dear Chairman Neugebauer:

 

On behalf of the Consumer Bankers Association, I write to express my support of H.R. 5027, a bill that would amend the Federal Reserve Act to make a majority of stock callable that banks are required to purchase to be members of the Federal Reserve System. CBA is the voice of the retail banking industry whose products and services provide access to credit for consumers and small businesses.  Our members operate in all 50 states, serve more than 150 million Americans, and collectively hold two-thirds of the country’s total depository assets.

 

Nationally chartered banks are required to be members of the Federal Reserve System. As a condition of their membership, banks are required to purchase stock issued by the Federal Reserve Bank for which they receive a dividend rate tied to the 10-year Treasury note that is currently 1.9 percent – down from the six percent rate previously issued to banks for the past 100 years. Unlike traditional common stock, stock issued by the Federal Reserve Bank may not be sold, transferred, pledged as collateral, nor can it rise in value. As such, the Federal Reserve Bank stock is not an investment choice by member banks, but rather a legal mandate that reduces a bank’s ability to meet consumer demand.

 

Banks face increasing fixed costs that can negatively affect credit availability to our customers. H.R. 5027 is commonsense legislation that will permit banks to better leverage what was once inactive capital and invest it into the communities they serve, helping consumers meet their credit needs and growing the economy.  Allowing capital that has been historically forced to remain dormant within the Federal Reserve to be used for prudent lending will not only be good for consumers, but it will also generate more than $1 billion in taxable revenue over the next ten years.

 

CBA thanks you for your continued leadership on this issue and welcomes the opportunity to work with you in passing this needed legislation through Congress.

 

Sincerely,

 

Richard Hunt

President & CEO

Consumer Bankers Association