Rep. Barney Frank, D-Mass., ranking minority member on the House Financial Services Committee, introduced a bill on March 17 that, if enacted, would direct the Treasury Department to levy $2.5 billion in “risk-based assessments” on “hedge fund managers with $10 billion or more in assets under management on a consolidated basis” and on other “financial companies with $50 billion or more in total consolidated assets.”
The bill, the Emergency Mortgage Relief and Neighborhood Stabilization Programs Cost Recoupment Act of 2011 (H.R. 1151), says that proceeds of the levy on hedge funds and financial companies would go to offset the costs incurred by the federal government under the Emergency Mortgage Relief Program and by states/municipalities under the Neighborhood Stabilization Program (NSP), says Bill Donovan, a partner at the law firm Venable in Washington.
The House voted on March 16 to end the Neighborhood Stabilization Program (NSP), a program which provides funding to help communities deal with large numbers of foreclosures and abandoned properties. The NSP Termination Act (H.R. 861) has now been referred to the Senate Banking Committee.
Marilyn Okoshi, a member of the Financial Services Practice and Chair of the Structured Products Practice at the law firm KattenMuchinRosenman in New York, said in an email message: “Why target hedge fund managers to pay for mortgage relief?” Hedge funds, she says, “were not bailed out by the federal government or the taxpayer and did not originate or drive the practices that led to lending money to uncreditworthy borrowers.”
Frank’s legislation seems to be, she continues, “in effect, imposing an additional tax on a targeted class of taxpayers who were not related to the cost incurred. I may be wrong, but I am not aware of another levy that is not generally applied to all taxpayers that is unrelated to a specific use.”