WASHINGTON -- The House voted overwhelmingly on Thursday to preserve $17 billion in government payouts to banks, as part of a major highway funding bill.
The GOP had initially pressed to include other bank-friendly measures in the highway bill, including a plan to hamstring the new Consumer Financial Protection Bureau and deregulate large banks. Those efforts were scrapped in favor of the more straightforward $17 billion payment.
Federal highway funding has traditionally been paid for by a tax on gasoline, which has not kept pace with inflation. But the GOP has fought efforts to fund the spending with tax increases, seeking instead to offset the highway measures with spending cuts.
Over the summer, the Senate agreed to help pay for the highway bill by eliminating $17 billion in payments that the Federal Reserve makes to banks. But on Thursday, House Republicans reversed that move, voting on an amendment that would preserve the bank payouts. The money would be recouped by draining an account that the Fed uses to conduct monetary policy.
That fund, known as the Fed's surplus capital account, is used to absorb temporary losses as the central bank buys and sells securities as part of its normal operations. The central bank drew on this account 158 times between 1989 and 2001, according to a 2002 report by the Government Accountability Office.
Only two Republicans opposed the measure, which was introduced by Rep. Randy Neugebauer (R-Texas). The government payments to banks received strong support from the Freedom Caucus, which has prided itself on opposition to "crony capitalism." Reps. Justin Amash (R-Mich.), Jim Jordan (R-Ohio), Scott Garrett (R-N.J.), Raul Labrador (R-Id.) and Mick Mulvaney (R-S.C.) all voted to preserve the payments to banks.
The Neugebauer amendment would also prevent an increase in the guarantee fees charged by Fannie Mae and Freddie Mac, reversing a measure included in the Senate version of the bill. That element may have helped lure the 113 Democrats who joined Republicans to maintain the payments to banks. The 70 Democratic opponents were largely drawn from the Congressional Progressive Caucus.
The gas tax has been fixed at 18.4 cents per gallon since the 1990s, even as the price of gas and other goods have risen considerably, effectively curbing the funds available for road and bridge repairs.
Banks have aggressively lobbied Congress to maintain the flow of government money. Fed Chair Janet Yellen has defended the payments, saying they encourage banks to be part of the Federal Reserve System. The Fed, however, has the authority to regulate banks whether they participate in the formal system or not. And access to the Fed's borrowing facilities remains a powerful incentive for banks to remain in the system with or without the annual payments. Banks also rely heavily on payment and securities settlements services provided by the central bank. Yellen has not called for cutting the Fed's surplus account.
Zach Carter is The Huffington Post's senior political economy reporter and a co-host of the HuffPost Politics podcast, "So That Happened." Listen to the latest episode here: