Responsible Banking Act of 2010

Mr. Speaker, it is said that one out of every three American homeowners is underwater with their mortgage, meaning that they owe more on their mortgages than the house in which they live is worth. One out of every three Americans.

We know that this year there could be at least 8 million Americans actually losing their homes. We know there are 15 million Americans unemployed. There have been record numbers of foreclosures and also record numbers of business failures. There has been a credit freeze. Some say that we have a jobless recovery, or a cashless recovery if you are an investor and you wait for your dividends because dividends aren't in at the moment, and perhaps even a homeless recovery where people are losing their homes, losing their jobs, losing the quality of their investments. And it is said that the economy is recovering.

What is going on in America? What is going on is the banks have taken enormous power during the last few years, and they have received that power from the Federal Government in the form of bailouts. I voted against the bailouts. I don't think the government should be picking winners and losers in the economy. And I also don't think that the government should serve as an engine to take the wealth of the Nation and accelerate it upwards, because that is exactly what has happened. Whether it has been a Republican or Democrat administration, that process of acceleration of the wealth is continuing.

Now U.S. banking companies have been the beneficiaries of unprecedented government money in the form of multiple, ongoing, taxpayer-financed Federal Government bailouts and subsidies, virtually unlimited access to money at near zero rates of interest, Federal purchases of impaired assets, low-cost loans, open-ended guarantees, all in the name of restoring normalcy to U.S. financial markets.

In the coming days, banks are expected to begin paying out substantial bonuses to top executives. The total amounts rival the payouts at the peak of the real estate bubble in 2007 and are set against a clear commitment of policy to strengthen the underlying health of the banking system by enabling banks to recapitalize. The bonuses being paid out could and should be directed primarily toward enhancing the capital base of the banking system. Banks could also use the profits to deal with unrecognized losses from real estate transactions and other imprudent investments to reduce outsized fees charged to struggling consumers, to increase lending to small- and medium-sized businesses, and for a variety of other purposes that would provide struggling Americans with a more vibrant and beneficial financial system.

Today, banks are earning outsized profits, not by lending or investing in the American economic prosperity, but by trading interest- free dollars taken from the Federal Reserve for other financial assets in the U.S. and around the world. And rather than use these profits to enhance the capital of the banks, they are being taken out in the form of bonuses to benefit certain individuals, corporate banking executives who have been more lucky than smart.

Now in order to staunch this leakage of corporate profits from bank reserves and shareholder capital, I have introduced H.R. 4414, The Responsible Banking Act, that would tax banks for the windfall bonuses they pay to their management, and the tax would be at 75 percent. We cannot let banks crush

businesses. We cannot let banks challenge this government with our own tax dollars. We need broad reform in our financial system, and I will be addressing that at another time. But one element of that reform must be to impose some fiscal discipline onto these banks that think that they can get away with giving themselves mega-bonuses while the rest of America is suffering and starved for capital.

Support H.R. 4414.

Yesterday, I introduced H.R. 4414, a bill that imposes a 75 percent tax on the outside bonuses bankers are paying themselves from windfall profits earned from massive Federal Government support.

This bill is necessary because bankers are about to pay out some of the largest bonuses in history. All banking corporations, whether they received direct assistance or not, received substantial benefits from government bailouts. Bankers' failures to self-regulate, let us remember, were the direct result of the crisis we're in today. They need to be told that the money they're making is a public trust, not something they've earned for good behavior.

Bank profits are the result of a deliberate Federal Government policy to restore banking capital and ultimately investment in American prosperity. Banking bonuses have nothing to do with these objectives, and payouts to bankers are a form of appropriation of public wealth.

Banks could be using their profits to do many things to improve the prospects of economic recovery, including strengthening their capital base, recognizing and writing off their real estate losses, reducing fees charged to customers, especially for seniors and struggling consumers, and increasing lending to small and medium-sized companies.

Support H.R. 1414.

I have introduced H.R. 4414, the Responsible Bankers Act of 2010. Now, many of you know I voted against both pieces of TARP legislation.

It is time that America got their money back and imposed a 75 percent tax on the bonuses that bankers are planning to pay themselves using windfall profits earned from massive taxpayer support of the financial services industry. The Responsible Bankers Act will not penalize banks for making a profit but, rather, will tax the bonus pools that are set aside.

As I pointed out a month ago, bankers are preparing to pay themselves record bonuses, rather than lending and investing in American prosperity. They should use their profits, and they could use their profits, to do many things to improve the prospects of the American economy, like strengthen their capital base, reduce fees charged to customers, or increase lending to small and medium-sized companies. Well, they are not doing that. They are hoarding it. They are using the money to try to take over other banks.

H.R. 4414 draws on the movement that is happening right now in the U.K. and around the world, where people are waking up that if banks are not there to help with the economy of the Nation, then they should have to pay a serious tax on their bonuses.